§ 18. Mr. Dai Havard (Merthyr Tydfil and Rhymney)If he will make a statement on the impact on his Department and its agencies of adopting the resource accounting system. [135561]
§ The Secretary of State for Defence (Mr. Geoffrey Hoon)In the current financial year, 2003–04, the Ministry of Defence completed the change to full resource accounting and budgeting from the old budgeting system, after a transitional period from April 2001 to March 2003. Resource budgeting uses accruals-based principles to plan and control spending. The introduction of resource accounting and budgeting has been a major change programme in its own right. With its huge and diverse asset base worth some £86 billion, the Ministry of Defence has been particularly affected by the move to full resource accounting and budgeting. That has raised issues such as how quickly it might use resources released by reducing the asset base to fund other priorities. As I indicated to the House on 16 October at columns 280–81, factors such as that and 534 exchange rate fluctuations have led to a requirement to make some adjustments to ensure that the MOD continues to operate within its budget.
§ Mr. HavardI thank my right hon. Friend, a lawyer, for giving me the accountant's answer. I want to deal with the perhaps unintended consequences of introducing the policy in three particular areas. I would like to know whether revaluations of assets have led to or are likely to lead to reductions in acquisition spend; whether there has been an effect in relation to stock reductions, in terms of the ability to respond when there is a point of conflict; and whether the political consequences are properly understood by the bean counters of both the Ministry of Defence and the Treasury. It seems to me that if we are not careful we will end up understanding the price but not the real value of our industrial policy, our political intentions and the operational safety and capacity of our armed services. I would like some assurances on those matters.
§ Mr. HoonI am very grateful to my hon. Friend for taking such a serious interest in what is obviously a vital issue not only for the Ministry of Defence but right across government. I want to remonstrate with him for his suggestion that lawyers are somehow more interesting than accountants. Clearly, there would be a great debate about that. Although I know on which side of the argument I would fall, I recognise that there is a great deal to be said for accountants, particularly when they determine the MOD's considerable budget. Although my hon. Friend comments on the political implications of this, I am confident that we have taken them fully into account.