Alex Massie

The Great Defence Procurement Rip-Off, Housing Edition

The Great Defence Procurement Rip-Off, Housing Edition
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There's no business like government business. Reacting to Philip Hammond's statement on future army basing yesterday, today's newspapers have led on either the decision to strip the Desert Rats of their tanks or on the broken promises on basing made to some parts of the country.

Bringing the army back from the Rhine makes plenty of sense. That is, there's no conceivable need for British troops to remain in Germany. It is, perhaps, remarkable that, following the collapse of the Soviet Union, it will have taken (by the time the move is completed) more than a quarter of a century to achieve this. No-one can accuse the MoD of rushing these things.

The Defence Secretary claimed yesterday that basing these troops in the United Kingdom would save £240m a year. Perhaps it will. He also said the costs of the relocation will be an astonishing £1.8bn.

As always with defence matters one should probably expect that to prove an unduly optimistic estimate of the final cost. But it is still an extraordinary figure. For instance, the cost of building houses for 1,900 military families plus additional housing for 7,800 single servicemen is estimated at £1bn. This is a remarkable figure and one that does not suggest the MoD is interested in or capable of controlling costs.

For instance, if the average construction cost of each house is estimated (on the back of my envelope) at a pretty damn generous £120,000 that would require the MoD to spend £228m building these 1,900 houses. Since the MoD already owns the land upon which these houses will be built, the actual construction costs should be much lower than those which would be expected in a comparable private-sector development.

But then the MoD doesn't do these things cheaply. It is very proud of the new housing built at Faslane, for instance. There, a mere £123m was spent on new "Single Accommodation Units" for 1,754 naval personnel. That works out at £70,000 per unit (though the cost also includes a new "super-mess"). A remarkable sum for accommodation that is, essentially, little different from that you'd find in a modern university hall of residence.

How do universities compare? Well, Warwick University has recently built two new Halls of Residence which will house more than 1,000 students. The cost? £45m which works out at roughly £44,000 per "unit". If the MoD were to built the 7,800 units it needs at this price, the cost would be £340m.

It seems probable - judging from the £1bn figure announced - that the MoD will spend twice as much as that. Even if you allow for a "modest" defence "premium" of, say, 20% it remains remarkable that you can expect to spend £1bn to house fewer than 10,000 people.

Then again, it is also extraordinary how public sector infrastructure projects have come to cost as much as they do. As John Kay observed in the FT last year, for a hundred years after the great Victorian era the cost of road and bridge and tunnel building rose more or less in line with inflation. Since then it has sky-rocketed. Doubtless there are some good reasons for this but it is hard to avoid the thought that it is a racket and a rip-off.

Defence procurement may be a special case but while one can appreciate that a new fighter jet or aircraft carrier might be quite expensive it is difficult to understand how an ordinary army house can cost quite as much as it apparently does. But, hey, nice work if you can get it.

Written byAlex Massie

Alex Massie is Scotland Editor of The Spectator. He also writes a column for The Times and is a regular contributor to the Scottish Daily Mail, The Scotsman and other publications.

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