Under Labour, the Ministry of Defence recorded £1.2 billion of losses last year, from cancelled programmes to buildings knocked down before they had paid their way.
But new answers from defence ministers show how little the taxpayer has to show for some of it.
It raises an obvious question: when every pound for defence is being fought over, why is so much still being written off?
The figures are set out in the MOD’s annual report and accounts for 2025-26, which record 17,622 separate losses worth £1,234 million. Written answers from defence minister Luke Pollard, published on 6 October in reply to the Conservative MP Ben Obese-Jecty, now explain what lies behind some of the entries.
Among them are £5.76 million lost on a cancelled scheme to build solar farms on defence land, £4.74 million on maintenance software for the RAF’s Atlas transport fleet that did not work, and £1.35 million paid to the consultancy Deloitte after the department ended a contract early.
The MOD also paid almost £2 million in penalties to the Treasury for getting its own spending forecasts wrong.
There is a fair case to be made for the department, and it should be made first.
Total losses fell by around a third on the year before, when they reached £1.9 billion. A large share of the total is accounting rather than cash going out of the door. Some £408 million reflects an impairment following a review of historic assets at the Atomic Weapons Establishment, and much of the rest comes from writing down buildings and equipment that have reached the end of their useful lives.
Nor is cancelling a failing project automatically a scandal. Stopping something that will not work is better than pouring more money into it. Ministers say they want defence buying to become “more risk-aware and less risk-averse, recognising that excessive caution can delay the delivery of critical military capability”, in the minister’s words. Taking more risk means some projects will fail.
Nothing in the answers suggests anything improper has happened.
But the detail still raises questions.
Take the solar farms. The Photovoltaic Farms Project, Mr Pollard said, “was intended to deliver strategic and environmental benefits”, but “no longer represented value for money due to cost escalation and unforeseeable technical constraints limiting the benefits”. The £5.76 million loss was booked on what he called “the most likely worst-case scenario”.
So who approved a green energy scheme on military land that turned out not to be worth building, what was it expected to cost, and how much had been spent before anyone pulled the plug?
Then there is the Atlas, the RAF’s A400M transport aircraft. The £4.74 million Software Module project was meant to give the fleet an electronic system for recording maintenance. According to the minister, “it became clear that the proposed solution could not meet the required functionality, security, and airworthiness standards”, and the requirement had also changed. Conservative Post reported last week that fewer than half of the RAF’s 22 Atlas aircraft are fully ready for operations on a typical day.
The Deloitte payment is shorter to explain. The firm received £1.354 million “following the termination for convenience of the Project SERAPH contract”, a payment made under the contract’s terms and negotiated by the department. The answer did not say what SERAPH was for, or why it was stopped.
The forecasting penalties are perhaps the most telling. The Treasury fines departments in any month when their cash forecasts miss by more than 5 per cent either way. The MOD ran up £1.957 million of these penalties in 2025-26. The money goes back to the Treasury rather than vanishing, but it is still money the defence budget no longer has. Mr Pollard said forecasting “can be challenging, especially given the impact of operational requirements, which can change at short notice”.
One entry reads like a thriller. A £1.039 million payment went on equipment bought under a short-term contract, which was then “seized by the Polish authorities as part of an independent investigation into the supplier”. The MOD says that investigation was unrelated to its own purchase. Either way, the equipment “could not be recovered or returned to the Department”.
On the estate, £31.7 million was written off for buildings “demolished before full economic benefit has been obtained”, which the minister put down to “Business as Usual asset management activities”. A further £6.3 million related to property found to be derelict or already demolished during a rolling revaluation, and £9.9 million to buildings whose value had fallen or which were due to come down.
The biggest entries are larger still. The 2025-26 accounts record £253.6 million for the cancellation of a programme called Shadow Mk2, with a further £5.4 million fruitless payment linked to it, and £235.7 million for the cancellation of Project Morpheus.
Many of these projects began long before the current Government took office, and the accounts do not say who started them. Waste in defence has never belonged to one party.
But Conservatives have always argued that the first duty of government is the defence of the realm. The corollary is that money voted for defence should buy defence: ships, aircraft, ammunition and trained people, not consultancy exit fees, Treasury fines and solar farms that never get built.
If ministers want the MOD to move faster and take more risk, Parliament will want to see failures caught early, kept cheap and reported plainly.
The Government should answer some straightforward questions.
What was the solar farm project expected to cost, and how much was spent before it was cancelled? What did the Atlas software project cost in total, and what is replacing it? What was Project SERAPH, and why did it end with a payment to Deloitte? How will the MOD stop paying Treasury fines for its own forecasting? And how much of last year’s losses was cash actually spent, rather than accounting write-downs?
The department may have perfectly good answers.
Last year’s losses came to £1,234,125,000. Taxpayers are entitled to know what they got for it.
