Osborne Says Deal Reached With Ministry Means U.K. Defense Cuts

U.K. Chancellor of the Exchequer George Osborne said he has reached a deal with the Ministry of Defence in budget talks on 2015-2016 military spending.

Appearing today on the BBC’s “Andrew Marr Show,” Osborne said the agreement will mean renegotiations with equipment suppliers and cuts to civilian staff. Troop numbers will be unaffected. The chancellor said he and Defence Secretary Philip Hammond came to the agreement on spending late yesterday.

With days to go before Osborne’s June 26 announcement of where he’s going to find 11.5 billion pounds ($17.7 billion) in savings for the year beginning April 2015, he hasn’t announced where he’ll find most of the money. Business Secretary Vince Cable has refused to agree on cuts to his department.

“There’s not a massive argument,” Osborne, a Conservative, said of talks with Cable, a Liberal Democrat whose party is the junior partner in the governing coalition. “We’re arguing about the small details, not the big picture.”

Osborne didn’t say how much money had been saved from the defense budget. As of June 14, he had found 3.6 billion pounds of the savings required from all departments.

The chancellor has pledged to protect the budgets of schools, hospitals and international development, requiring deeper cuts elsewhere. The Liberal Democrats oppose further reductions in welfare spending.

The financial crisis has wrought havoc with the public finances by sapping tax receipts and pushing up spending on welfare. Since peaking at 11.1 percent of gross domestic product in 2009-2010, the deficit has fallen by less than a third instead of the half the government projected when it took office three years ago.

Osborne also confirmed that if he’s in his post after the 2015 election, he’ll want to review whether wealthier recipients of government pensions should have some of their retirement benefits means-tested. The opposition Labour Party is already committed to asking the same question.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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