MoD facing billions in cuts in 2010
Thursday, April 23, 2009
The MoD is facing a funding time bomb after Alistair Darling's yearly budget revealed that next year the ministry's funding will be slashed by £2bn.
On a day in which very little was provided for the MoD in the budget, the Treasury revealed that in 2010-11, funding for the MoD will be slashed by £2bn from £38.7bn to £36.7bn, a cut of 5.16 per cent.
The revelation is damaging to say the least for the department. Already the MoD faces an expensive procurement wish list that must be cut and a £2bn budget deficit in addition to the costly and ongoing war in Afghanistan. All of these problems were present in last year's budget.
For this year the department's budget will rise by £800m. Darling did promise an additional £50m for upgrades to service accommodations.
It is unclear how the MoD will come up with the savings. Treasury projections have the Mo D creating £315m in savings this year alone. To an extent these could be factored into the cuts next year but efficiency savings targets are not always met and often are grossly overestimated.
With the huge budget cut looming, the Defence Storage and Distribution Agency, the oil pipelines run by the MoD and the an animal training facility for bomb sniffer dogs and horses will most likely be sold off to the private sector. For the last five months all three have been rumoured to be on the sale block. Other agencies that could produce a substantial profit and huge savings may also be reviewed for sell off.
In terms of procurement, more delays and cuts can be expected this year. Britain now appears likely to cut the A400M, especially after statistics acquired by the Conservatives showed that the RAF could save £900m from buying 25 C-130s instead of 25 A400Ms. The Nimrod replacement programme, one of the most severely delayed and over budget programmes in recent memory may also be axed and replaced by a cheaper off the shelf model from the US. FRES's future will continue to be held in limbo. Although ministers claim that the vehicle programme is still alive and that decisions will begin to be made early in 2010, this now appears highly unlikely given the £3bn pricetag. More delays can be expected.
Defence analysts have told Defencemanagement.com in recent weeks that the purchase of 150 Joint Strike Fighters is also highly unlikely. A purchase will be made, but most likely in the range of 75-80 aircraft, maybe less, one defence economist said.
All of this will serve as a backdrop to the ongoing war in Afghanistan which is requiring more money and troops on an annual basis as the intensity of the conflict grows. Defence Secretary John Hutton wants the MoD to focus its procurement spending on current operations. The Treasury has already expressed concerns about how much a troop surge will cost and has put a ceiling on urgent operational requirement spending for this year at £635m, £265m less than 2008-09. Anything over this amount will have to come from the MoD's own budget.
Darling's budget was expected to be bleak for most departments in Whitehall, but the MoD, already in financial difficulty, is far worse off today than it was yesterday.
: There is, from an economical point of view, no purpose in trying to keep an uncompetiative industry afloat by subsidies. What people forget is that the persons who are employed in these subsidised industries, could be employed in something with a future - something in which the collected tax revenue is not infact money that was given out to begin with, and these people are not the bottom of the barrel. It is extreamly easy to figure out better uses for our tax money than over pay company XXX for developing some item. 