Ministry of Defence Annual Report and Accounts 2 011-12 For the year ended 31 March 2012 Accounts presented to the House of Commons pursuant to section 6(4) of the Government Resources and Accounts Act 2000 Departmental Report presented to the House of Commons by Command of Her Majesty Annual Report and Accounts presented to The House of Lords by Command of Her Majesty Ordered by the House of Commons to be printed 6 December 2012 HC 62 London: The Stationery Office £38.50 This is part of a series of departmental publications which, along with the Main Estimates 2012-13, the document Public Expenditure: Statistical Analyses 2012, and the Supply Estimates 2011-12: Supplementary Budgetary Information, present the Government’s outturn for 2011-12 and planned expenditure for 2012-13. © Crown copyright 2012 You may re-use this information (excluding logos) free of charge in any format or medium, under the terms of the Open Government Licence. 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Contents Part One – Annual Report Preface 4 Foreword by the Secretary of State for Defence 6 Introduction by Chief of Defence Staff and Permanent Secretary 7 Performance and Key Facts 8 Section A: Major Responsibilities 1 – Afghanistan (including other Operations) 13 2 – Standing Commitments 17 3 – Other Operations (Contingent) 27 4 – Defence Exports 29 Section B: Structural Reform 5 – SDSR Implementation 31 6 – Armed Forces Covenant 37 7 – Defence Reform Review 45 8 – Delivering Defence in the most effective, efficient and sustainable way 49 Part Two – Annual Accounts 1 – Statement of Accounting Officer’s Responsibilities 90 2 – Governance Statement 91 3 – The Certificate of the Comptroller and Auditor General to the House of Commons 100 4 – Report of the Comptroller and Auditor General on the 2011-12 Accounts of the Ministry of Defence 103 5 – Financial Statements 108 6 – Notes to the Accounts 114 7 – Votes A Statement – Statement of Approved Maximum Armed Forces Numbers 170 Annexes A – Accountability to Parliament 172 B – Trading Funds 175 C – Government Standards 177 D – Sustainability Report 181 3 Preface i. The Ministry of Defence’s (MOD) Annual Report and Accounts is an overview of UK Defence and how the MOD has used the resources authorised by Parliament from 1 April 2011 to 31 March 2012. Part One: Annual Report ii. The principal activity of the Department is to deliver security for the people of the United Kingdom and the Overseas Territories by defending them, including against terrorism, and to act as a force for good by strengthening international peace and stability. The MOD Business Plan 2011-15 was originally published in November 2010 and has since been refreshed and published on the 31 of May 2012. It lists the Department’s priorities as: ● to succeed in Afghanistan; ● to continue to fulfil our standing commitments; ● to succeed in other operations we are required to undertake; ● to transform Defence by: – restructuring the Armed Forces and their capabilities; – implementing the new Defence Operating Model; – delivering Defence in the most effective, efficient and sustainable way. The MOD Business Plan splits this list into ‘Structural Reform Priorities’ and ‘Departmental Responsibilities’. Although this report contains information on the six priorities contained in the current Business Plan, it is based on the structure of the previous business plan, which was in force for all of the financial year. This includes a separate chapter on defence exports plus an additional chapter for the Covenant, reflecting the importance that the Government places on our Service personnel. Further information on the MOD Business Plan is available at: http://www.mod.uk/DefenceInternet/AboutDefence/CorporatePublications/BusinessPlans/ ModBusinessPlans/management Further details of the Strategic Defence and Security Review (SDSR), Defence Reform and Transparency are available at: http://www.mod.uk/DefenceInternet/AboutDefence/WhatWeDo/PolicyStrategyandPlanning/ DefenceReform/ and http://www.mod.uk/DefenceInternet/AboutDefence/WhatWeDo/Transparency/ iii. Performance against the actions articulated in the Structural Reform Plan, as well as other Defence priorities, is assessed and managed by the Defence Board through the Defence Performance Framework. The Framework involves a quarterly performance and risk report that is focused on the Defence Board’s strategic objectives. It also involves an annual performance and risk report that allows the Board to assess whether strategy needs to be adjusted and provides oversight of performance in individual areas. The performance section of this report is set out against the priorities articulated in the MOD Business Plan and informed by reporting generated by the Defence Performance Framework. 4 Annual Report and Accounts 2011-2012 Part Two: Annual Accounts 2011-12 iv. The MOD prepares accounts for each financial year detailing the resources acquired, held, or disposed of during the year and the way in which the Department has used them. Accounts are prepared in accordance with directions issued by HM Treasury including the accounting instructions in the Government Financial Reporting Manual. The accounts are audited by the Comptroller and Auditor General who provides an opinion as to whether: the financial statements give a true and fair view and have been properly prepared; the Statement of Parliamentary Supply properly presents the outturn against Parliamentary control totals and that those totals have not been exceeded; expenditure and income has been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. 5 Part One – Annual Report Foreword by Secretary of State for Defence The primary purpose of Defence is protecting this nation and our dependent territories against those who threaten our security and our national interests. My highest priority as Defence Secretary is success on operations: standing operations, such as defending the skies above Britain, protecting our trade routes or maintaining our continuous nuclear deterrent; helping to deliver a safe and secure Olympics, as our Armed Forces have been doing this summer; high intensity interventions as in Libya to extract our own citizens from a war zone and then to impose the will of the international community; and, of course, enduring operations to protect Britain’s national security such as are being undertaken in Afghanistan. Over the last financial year we had 9,500 military personnel continuously deployed in Afghanistan, with Task Force Helmand led first by 3 Commando Brigade, and then by 20 Armoured Brigade. The MOD, together with partners in Government and our Allies, has made real progress in combating the insurgency and developing the capability of the Afghan National Security Forces. By the end of March 2012, over 50% of the Afghan population were living in areas where Afghan forces are in charge. We recognise the debt we owe to the 44 servicemen and women who were killed in Afghanistan between April 2011 and March 2012. Our combat role in Afghanistan will soon be coming to an end, but we owe it to all those who have given so much, over the decade since operations began, to make sure that as we draw down, we do so achieving our central aim – preventing Afghanistan from again being used as a safe haven for international terrorists. After a decade of high tempo operations, we have to ensure Britain’s Armed Forces are re-structured and re-equipped in line with the Strategic Defence and Security Review (SDSR), to protect our national security against the threats we will face in the future. We have also had to tackle an equipment programme that had been allowed to grow beyond the resources available at a time when the overriding strategic requirement is to bring order to the public finances. So this is a time of great change in Defence, and we are making great progress. But we still have a long way to go to complete the project of Transforming Defence, and delivering the vision set out in the SDSR – a vision of formidable, adaptable and well-equipped armed forces backed by disciplined processes and an efficient and effective Department. Defence rests on three pillars: the Armed Forces themselves, both Regular and Reserves; the MOD civilians who work alongside them; and, increasingly, the Defence contractors who provide support, both at home and on operations. Succeeding on operations, while simultaneously driving through the most radical transformation of the MOD in a generation, is a huge task. I know that as we move forward we can count on the commitment, dedication and skill of the people – both military and civilians – who deliver Defence. 6 Annual Report and Accounts 2011-2012 Introduction by Chief of Defence Staff and Permanent Secretary Last year, we reported that 2010-11 had been a very challenging year. 2011-12 has been no less so. The priorities have remained the same – to succeed in Afghanistan, on current operations, and on our standing tasks and to transform Defence – but the tempo of delivery has increased. In Afghanistan the move to the third stage of transition to Afghan control means that three quarters of the population and all the provincial capitals will have ANSF taking the lead security responsibility. In Libya, our armed forces responded at pace and with courage to the challenge of brutal suppression of a struggle for freedom.