Out of sight
What became of the spending cuts proposed in 2011 for the Ministry of Defence’s budget?
The Netherlands Court of Audit has investigated the cost-saving measures presented in the 2011 policy document, Defence after the Credit Crisis. The aim of this report is to learn lessons from the past for the benefit of the future. We know from previous crises that the social consequences of cost-saving measures are not always clearly understood.
Audit findings: None of the savings has been realised
Ten years after the spending cuts were proposed, we found that none of the four measures we audited (the disposal of mine hunters, transport helicopters and battle tanks, and the relocation of the marine corps base) had met its targets. Over the period, the four measures had reduced expenditure by 46% (cumulatively: €423 million) less than projected in the policy letter. The aggregate sales proceeds of all the measures was at least €22 million lower than estimated. The minister received compensation for the disappointing proceeds from the treasury yet they were due mainly to the poor state of maintenance. Our audit found that the cost-saving measures were not implemented as intended in 2011 and that materiel earmarked for disposal was often retained or even added to. With a view to cost savings, this is not effective. Parliament might have been informed about these changes, albeit often summarily, but the link to the intended savings was not explained. It was therefore not clear to parliament whether less money was actually spent.
Why did we audit spending cuts at the Ministry of Defence?
The purpose of this report is to learn lessons from the past for the benefit of the future. We know from previous crises that the social consequences of cost-saving measures are not always clearly understood. Our audit series on spending cuts and the costs and benefits of measures to improve the budget balance following the credit crisis, moreover, found that the projected benefits of such measures were not always achieved. Furthermore, parliament was barely able to scrutinise the savings. We therefore dissected the savings sought by the Ministry of Defence from the disposal of materiel. By following the materiel over time we were able to track the realisation of the savings and the decision-making.
We drew 7 lessons from our audit that we recommend to the government and parliament. We are publishing this report shortly after the elections in anticipation of a new coalition agreement and new government policy at a time when the corona crisis is having a huge impact on public finances and on policy-making. We hope lessons can be learned from the past.
Audit methodology
To answer the audit questions we consulted parliamentary papers and other public sources, requested documents from the Ministry of Defence such as internal policy papers, business cases and decision-making documents. We also used data on estimates and outcomes, including the calculation model, weapon system templates and standardisation sheets. In Addition to these documents, we verified our findings in interviews and in two sessions with stakeholders to discuss the findings and explanations. Further triangulation was obtained by requesting limited support from civil servants at the Ministry of Finance and the Ministry of Justice and Security. A report of findings was drawn up for each case. The ministries concerned corrected factual errors during the clearance procedure. These 4 case studies comprise the factual basis for this report. The standards arising from the main audit question are also assessed in these case studies.
Current status
The audit was published on Tuesday 13 April 2021.