Tories hint at defence cuts

27 April 2009

The defence budget could continue to experience cuts and reductions in funding under a Conservative government, shadow Chancellor George Osborne has said.

Once thought to be one of the few areas in which the Tories would not make severe cuts, defence appears to be under additional scrutiny given the state of the government's finances.

Osborne and Dr Liam Fox, the shadow Defence Secretary are reviewing a series of cuts to the procurement budget including the Future Strategic Tanker Aircraft (FSTA) and the A400M programme.

Together these programmes would save the government around £2.7bn if cut. The A400M's problems and delays are well known. Cuts could bring the risk of financial penalties from European partners. But Osborne and Dr Fox now believe that cheaper off the shelf models could be bought which would still create savings.

The FSTA is the most expensive private finance deal ever, at £13bn. The MoD has yet to spend any substantial amounts of money on the programme since the industry partners have shouldered all of the risk. If they do not deliver, the MoD does not have to pay. Critics have alleged that the deal will leave the RAF with little control over its own transport planes. Others have said that the MoD took so long to finalise a transport plane deal that it ended up with the most expensive option available.

Cutting the programme however may lead to a major fallout in the relationship between the MoD and industry.

Word of the potential cuts was first reported in the Times.
"We are considering the future of government programmes and procurement plans that look like a luxury we simply cannot afford," Mr Osborne told representatives at the Conservative spring forum in Cheltenham yesterday.

"The public finances are out of control and that presents a clear and present danger to the prosperity of an entire generation. We will take the measures necessary to restore order and sanity to our public finances."