Attempts to cut the defence budget by the amount the Treasury wants is "financially and intellectually virtually impossible," defence secretary Liam Fox told David Cameron in his leaked letter, marked for the prime minister's eyes only.
He referred to cuts of £4bn – a figure at the lower end of the 10% to 20% range the Treasury is after – out of an annual defence budget of £37bn. The cuts would be spread over the four years of the forthcoming spending round. Fox should know that it is entirely possible to save £4bn, and more given the huge amount of money the Ministry of Defence wastes in bureaucracy and arms procurement. He has himself admitted the need to make hard choices about which weapons systems the military must give up – as give up some they must.
The defence secretary appeared to admit as much in a major speech in the summer to the Royal United Services Institute. "We face some difficult, delicate, and politically charged decisions", he said, adding: "We must act ruthlessly and without sentiment."
Fox is worried because influential voices in Whitehall are questioning plans to build two large aircraft carriers for the navy and Cameron is listening to them.
Dumping the carrier project – which with expensive US Joint Strike Fighters flying from them could cost £15bn – would help solve the MoD's immediate problems, officials said today.
If the carriers do go ahead, the navy will have to abandon plans for new frigates and sell off other ships including amphibious vessels, according to defence officials. Add savings from scrapping RAF Tornado and Harrier jets and Fox would be well on his way.
He knows that the navy has as many admirals as big ships, and the army as many generals as infantry battalions. He knows that for years the MoD has been living far beyond its means. Its record of procuring new weapons wastes billions of pounds every year as the independent National Audit Office repeatedly reminds us – identifying a black hole in the defence budget of £36bn.A report by Bernard Gray, once adviser to the former Labour defence secretary Lord Robertson last year accused the MoD of running a "substantially overheated" equipment programme, of "endemic" failings, years of "political fudge", and a "sclerotic" acquisition system which was merely benefiting the Taliban.
In 2008, General Sir Kevin O'Donoghue, chief of defence materiel, told the Commons defence committee: "I don't think we've had a properly affordable programme for many years." It is perhaps no wonder that the Treasury is sceptical about the cries of pain coming from the MoD.
The National Security Council, where the crucial decisions will be made, meets next week under Cameron's chairmanship after the Conservative party conference. Fox, who has already agreed to postpone a decision on Trident until after the next election in a move that will immediately save at least £600m, may use the conference to strengthen his hand. This may merely exacerbate the deep-seated yet eminently solvable problems facing the MoD's finances.
