Britain's defence programme is "entirely unaffordable" as it stands, the defence secretary, Liam Fox, said yesterday, in a speech preparing contractors and the military for a shift in spending priorities. He told an audience at the Farnborough air show that "change was coming", because of the unavoidable reality of running two overseas conflicts, and the acute cuts forced upon him "thanks to the mess left by the previous government".
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"The defence programme is entirely unaffordable – especially if we try to do what we need to do in the future while simultaneously doing everything that we've done in the past," he said. His assessment came after he confirmed over the weekend that the Ministry of Defence was being asked to foot the bill for the capital costs of renewing Trident. If he loses that battle, ministerial allies have warned there would have to be a further cut to troop numbers than that already accepted by Fox. His department is conducting a strategic review to update its spending priorities but, regardless, faces cuts of up to 20% in the government's autumn comprehensive spending review.
The National Audit Office also today looks at the MoD's spending, warning it must stop "living beyond its means" and budget realistically ‑ instead of running up a shortfall of £36bn over the next decade. The Whitehall watchdog says in a report that the department has had a tendency to revise upwards its annual budget within the year, sometimes by as much as £315m.
Amyas Morse, the office's auditor general, said: "A crucial question for the Ministry of Defence is whether it can use strategic financial management to stop living beyond its means. The current strategic defence and security review will provide an opportunity for the MoD to balance its books in the short-term. The greater challenge will be to keep spending plans affordable in the longer term. The department is not at present placing enough emphasis on financial management to be able to do this."
Trident would add a huge sum to Fox's department on top of the problems diagnosed by the NAO. The nuclear weapon is regarded as integral to national security, and so in the past has been funded by the Treasury ,with the MoD paying for its running and upkeep. Treasury officials are privately standing firm, saying that it had been agreed that Fox would absorb the capital costs of Trident into his departmental budget.
Trident is thought to cost between £14bn and £20bn over a decade, with those costs starting low and becoming larger towards the end of that period. Although the Comprehensive Spending Review only covers four years, during which the capital costs of Trident are not expected to be at their highest, Fox is thought to be keen to secure a deal that could last for a decade, during which Trident's costs become much higher. The defence secretary is an advocate of the renewal of Trident, while Liberal Democrats in the coalition government fought the last general election with a pledge to scrap it. Fox has in response initiated a Trident renewal "value for money" exercise, to try to make it less expensive.
In his speech, Fox also challenged defence companies to lower their prices. "The industry's long-term prosperity also rests on offering better value for money," he said. "Without cost containment in the current programmes, we have no option but to either cut the programmes under way, or curtail investment in future programmes."
the Guardian
