National Secretary Steve Jary said: “The report vindicates everything the union has warned against in the last year. Prospect has consistently warned MOD that it was travelling pell-mell along a route that would end in the department dangerously denuded of the skills it needs to function as an intelligent customer.

“Of all the departments of state, MOD has the greatest need to ensure it has the right skills in the right place and at the right time in order to supply the armed forces with the equipment it needs.

“The NAO report demonstrates very clearly that the department has no idea what its civilian staff do and will face skills gaps in the future because of the speed of the spending reduction and its cuts to specialist staff,” said Jary.

The union said when the NAO report is put together with the recent defence white paper, the NAO report is an accurate picture of the chaos behind the scenes, with little planning and no clear idea how the department will operate with a third less staff.

Jary said the union was disappointed that the NAO argued that MOD’s cost reduction plan represented value for money, when its proposed savings have already been eroded by the cost of redundancies and had spent £600m on external assistance in the last two years – buying back the expertise it has just made redundant.

“Again, the NAO is clear that MOD is in danger of losing its way unless it can manage to implement its cost reduction plan more effectively while refashioning itself with the necessary skills,” said Jary.

Prospect says:

• the cuts to the MOD civil service are over three times as severe as the cuts to the military
• the MOD civil service is planned to reduce by 32,000 (40%) by 2020, with the bulk of those cuts by March 2014
• the cuts in armed forces are planned to be just over 10%
• in 2015 the MOD civil service will number just 55,000. In April 1997 it was 118,000 strong.