Recommendation 5

The Department’s forecast savings from its DEO Portfolio by 2040 have already fallen from £2.4 billion to £0.65 billion, and there is a very real risk they will melt away completely. The Department’s estate is costly to run and maintain—it spent £3.1 billion on estate maintenance in 2019–20—and part of its rationale for reducing the size of the estate is to cut running costs. However, slow progress in completing site disposals means that it continues to pay for assets it does not need. As a result, its forecast benefits from the DEO Portfolio by 2040—measured in terms of disposal proceeds and reduced running costs, offset by rehousing costs—have fallen from Optimising the defence estate 7 £2.4 billion to £0.65 billion. But even this figure remains extremely uncertain. There are indications that the costs of works on sites that will house relocated personnel and equipment are increasing as more detailed planning is undertaken and the extent of works is better understood. In addition, the Department has not budgeted for the costs of upgrading its building to meet its net zero commitments, which early estimates suggest will be at least £1 billion. This also creates risks for the affordability of the Department’s disposal programme as the budget is based on reducing building costs by £1 billion. Recommendation: The Department should collect better data on the actual cost of preparing sites for disposal and the building works on sites receiving relocated personnel and equipment, including the cost of meeting sustainability commitments. It should use these data to re-assess the forecast savings from the disposal programme and include this in its annual update to the Committee.