MoD faces 10-15 per cent budget cut

In the aftershock of the 2008 financial crisis, the next Defence Review presents a moment of choice for the UK, as significant as the decisions it faced in the 1960's when, after years of indecision, NATO commitments were eventually prioritised over those East of Suez, according to a Future Defence Review Working Paper by the Royal United Services Institute (RUSI).

‘Preparing for the Lean Years: Defence Consequences of the UK Fiscal Crisis’, a new RUSI report written by Professor Malcolm Chalmers, estimates that the MoD will be required to make a budget reduction over the period 2010-2016 of around 10-15% in real terms (a cut of £4bn-£6bn). Even if the economy quickly recovers, it warns that ‘a prolonged period of austerity in public expenditure (including defence) is inevitable’.

Other points made in the paper include:

• Operations: The US ‘surge’ into Helmand could be used to relieve the pressure for increases in the cost of the UK's forces in Afghanistan. For serious savings to be made, however, the government would have to order a radical scaling-down of the UK presence. The conditions for this do not exist at present, and a unilateral UK drawdown would have considerable costs for relations with the US. Yet it is a possible source of savings over the years to 2016, the likely period of the next Defence Review.
• Pay: A policy of general public sector pay restraint could contribute to the MoD’s economy efforts. Were pay to be reduced below planned levels by 5%, annual savings for the MoD would amount to around £600 million, equivalent to 1.5% of total defence spending.
• Procurement: Contractual obligations limit the scope for near-term savings, notably in relation to the Typhoon project. But some other projects are less well-advanced, or have less restrictive contracts. Programmes for new aircraft carriers and their associated F-35 aircraft, new ballistic missile submarines and the Future Surface Combatant could all (in principle) be postponed or curtailed. Postponement of the Vanguard-replacement submarine programme could be particularly tempting, given that it is due to be the MoD’s largest procurement project from 2016-17 onwards.
• Capabilities: Further reductions may also have to be made in the numbers and types of aircraft squadrons, and/or naval vessels and/or ground force formations, together with their support costs. If the Review were to focus on maintaining the ability to contribute to collective efforts to balance emerging new Great Powers in Asia, the paper argues, priority is more likely to be given to high-tech maritime warfare capabilities. Were the UK to decide to focus its primary efforts on counter-insurgency capabilities, by contrast, priority might be given to maintaining capabilities that have been in considerable demand in Iraq and Afghanistan, such as tactical and strategic transport, surveillance and intelligence, special forces and engineers, as well as civilian capabilities.

This Future Defence Review Working Paper is the first in a series providing independent analysis and opinion on issues that are likely to feature in a Future Defence Review. It seeks to promote a vigorous and comprehensive debate – not constrained by any preconceptions of Britain’s role in the world or the purposes of its armed forces – amongst political parties, the academic community, industry and the electorate as a whole.

To view ‘Preparing for the Lean Years: Defence Consequences of the UK Fiscal Crisis’, and learn more about the Future Defence Review series, please visit www.rusi.org/fdr.