Probably because they assumed that they could afford to let people go and remove any reason to stay in, because they would make up the numbers in new recruits and reserves. They weren't wrong, but they are very short of the mark IMO. Less and less people want to join up these days, probably in no small part with thanks to the 10+ years we spent getting blown to smithereens in AFG, and the bad press the MOD has had over the last few years.
There is a simple fix to the problem, and unfortunately it's financial - give every serviceman and woman a financial retention bonus, to ensure they stay in until the end of their contract (which will kill off the PVR rate). And give those who join a golden hello when they graduate from Phase 2. These days, money talks louder than pride in serving your country.
