By Ben Farmer, Defence Correspondent
Telegraph Online – 27 December 2016
The Armed Forces have begun secretly preparing for another round of defence cuts despite the recent boost in funding, The Daily Telegraph can reveal. Senior defence sources have disclosed that there is not now enough money available for the various spending commitments already made and therefore more savings are necessary. Last year's Strategic Defence and Security Review (SDSR), which was supposed to fix defence plans for the rest of the decade, may have to be effectively reopened.
David Cameron pledged to increase defence spending to the equivalent of two percent of GDP to meet Britain's Nato commitments. However, the “increase” also meant that certain expenditure including pensions and UN peacekeeping are now included in the two-percent commitment – a move described as “creative accounting” by senior MPs.
The fall in the value of sterling compared to the dollar has also meant that new American-sourced equipment, which has already been ordered, is significantly more expensive to buy. The services are now preparing to take “very tough decisions” in the coming months as they are expected to find savings and new kit may be delayed.
A well-placed source said:
“The problem is the SDSR wasn't really properly funded for the first couple of years. The other problem is that there were so many other things rolled into the two per cent that didn't used to be there before. It's looking like 2018 or 2019 before things get any easier.”
“On top of that, the Treasury demanded efficiencies and then when we have to make those efficiencies it's very painful. There are going to be some very tough decisions in the next two or three months. It's looking like 2018 or 2019 before things get any easier.”
The MoD announced last month it was selling off a large amounts of its estate and forcing the Army, Navy and RAF to quit a raft of historic bases around the country, leaving several regions without a military footprint.
Recent months have seen a string of controversial cuts including the Navy losing anti-shipping missiles and its only repair ship, RFA Diligence. The Royal Navy is already understood to have recently been forced to ask ministers for extra money to cover the cost of refitting generators on its Type 45 destroyers after a string of power failures.
Prof. Malcolm Chalmers, Deputy Director-General of the Royal United Services Institute, said the Armed Forces were in for a tough few years. He said the Government boasted the defence budget was growing over the next five years, but in reality it had largely flattened out at present and would not increase significantly until the end of the decade.
“It's only good in comparison with first Cameron term. The five years after 2010 were very tough indeed.”
“The government likes to give the impression we are now in a steady period of growth but the magnitude of those increases is very, very small.”
He went on:
“It's very tight for the next three or four years and what's happening to the exchange rate is adding an additional strain.”
Prof. Chalmers predicted the shock of the pound's fall against the dollar meant would mean delays to some of the military's big purchases of US equipment. Britain has deals to buy billions of pounds of F-35 stealth fighters, P-8 submarine-hunting maritime patrol planes and drones from America.
“The number of major purchases in the United States in particular is clearly creating problems. It feels to me as though there would be pressure to push procurement back a bit.”
He said the Government's projections of a growing defence budget were also based on “optimistic” inflation forecasts of how much costs would rise.
Julian Lewis, chairman of the Defence Select Committee, which earlier this year (2016) questioned the MoD's accounting, said two per cent was not enough to deal with threats such as a resurgent Russia. He said Britain had spent more than four per cent on defence until the end of the 1980s.
“Even if there were no question marks over the way things have been included in the budget, even if it was absolutely kosher, it's still the lowest in terms of GDP that it has ever been.
“In opposition we used to excoriate labour for spending only 2.5 per cent.”
However, an MoD spokesman said:
“We spend more on defence than any other country in Europe, exceed Nato's two per cent target and have a budget set to hit £40 billion a year by the end of the Parliament as we invest £178 billion in equipment over the next decade.”