MoD faces fresh crisis over funding

By James Blitz and Alex Barker

Published: January 19 2011 23:00 | Last updated: January 19 2011 23:00

Senior figures in the Ministry of Defence are warning of a possible reopening of last October’s Strategic Defence and Security Review because the MoD lacks the funds needed to provide the military capability demanded by the government for 2020.

Amid signs that the MoD is in the throes of a new crisis over defence spending, senior figures at the department have discovered that they need to find at least £1bn a year of additional cuts if they are to meet the Treasury’s target for future expenditure reductions.

According to senior MoD officials, Britain’s service chiefs have begun to warn Downing Street and the Treasury about the problem, which emerged in recent weeks following a more pessimistic assessment by officials of how much the SDSR would actually save.

The defence review scaled back Britain’s armed forces over the next decade, leaving the UK with just one operational aircraft carrier, a smaller number of surface ships and a reduction of 42,000 MoD personnel.

Britain’s service chiefs believe there is no way the Treasury will loosen last year’s funding settlement for defence and give the MoD the extra cash it needs to meet future force numbers.

But senior military figures are warning that if no extra money is forthcoming, Downing Street and the Treasury will have to give the heads of the armed services a clear indication of where to cut.

Testing times

The Ministry of Defence faces challenges if Britain is to have the force structure in 2020 that David Cameron projected last October, writes James Blitz.

The MoD has to plug the funding gap in its accounts over the next four years. It must also win a rise of at least 1 per cent a year in real terms after 2015. If it fails to achieve these aims, some programmes set out in last October’s strategic defence and security review, including the single operational aircraft carrier, may be scrapped in the next SDSR in 2015.

As one senior military figure said: “Every day at the MoD these days seems like a day at the dentist.”

“The extra cuts we need to find are too big to be done by fudging a few numbers on the margins,” a senior military figure said. Instead, he said, the MoD may have to consider imposing a moratorium on some current military operations or scaling back the deployment of ships and aircraft.

However, two senior figures have told the FT this week that the idea of reopening the defence review only a few months after it was published cannot be excluded. Under this scenario, the government would find the additional savings by further reducing the number of army personnel, Royal Navy frigates or RAF jets that the UK is projected to have in 2020.

One figure said that reopening the SDSR would make the MoD look like “complete idiots” but that the idea was being actively considered.

Some senior figures in Whitehall and in industry say ministers will want to avoid such drastic solutions and will look to find savings in equipment programmes to which funds have not yet been committed.

But Professor Malcolm Chalmers of the Royal United Services Institute, a think-tank, said the scale of the funding shortfall was alarming. “The next few weeks are going to require some very difficult decisions to be made on Britain’s military capabilities and will require cuts in capabilities beyond what was announced,” he said. He added that this may require “quite significant reductions in capabilities.”