April 8 (Bloomberg) -- Foreign Secretary William Hague ruled out any reversal of cuts to Britain’s defense spending, dismissing media reports that military operations against Libya have forced a rethink.
The defense ministry has to reduce its budget by 8 percent over four years to tackle a 38 billion-pound ($62 billion) shortfall. Plans announced in October following a review included the ordering of fewer, cheaper planes for one new aircraft carrier and the possible mothballing of a second, which will carry only helicopters.
Newspapers including The Daily Telegraph and The Sun reported today that Prime Minister David Cameron was considering re-opening the review and scaling down the cuts. That was in light of military commitments in Libya, where British forces are part of a mission to protect civilians from attacks by Muammar Qaddafi’s forces, and elsewhere.
“These major decisions are not being reopened,” Hague told Sky News television today. “It would be wrong to think that we were reopening the defense review.”
The opposition Labour Party’s defense spokesman, Jim Murphy, criticized the government’s approach.
“We all woke up this morning to front-page newspaper headlines that the government had briefed they were opening parts of the defense review and what we’re having by lunchtime is them running away from their own planted story,” Murphy told BBC News television. “This isn’t any way to treat defense policy and it isn’t any way to treat the forces’ families of people who are serving with remarkable bravery on behalf of our country.”
The defense ministry said last night that it had reached agreement with the Treasury on how to tackle a shortfall in its budget for this year. Defense Secretary Liam Fox won’t have to make further cuts to major equipment programs after being allowed to account for revenue from future sales of surplus warplanes early, a person familiar with the discussions said.
Fox said last month that savings already identified for the fiscal year that started April 1 had fallen short of the target set in the Strategic Defense and Security Review last October. He was seeking extra savings of about 750 million pounds, raising the risk that purchases of equipment such as Boeing Co. Chinook helicopters would have to be scrapped.
Chancellor of the Exchequer George Osborne is allowing the defense ministry to book the receipts for the sale of Eurofighter GmbH Typhoon aircraft in order for Fox to balance his budget, even though no agreement on a sale has been reached yet. A deal to export the planes would be valued at about 500 million pounds, said the person, who declined to be identified because the discussions are not public.
The Treasury also agreed with the defense ministry that the money to fund individual military campaigns such as that in Libya can now fully come from central government funds, a change to the previous arrangement where only 50 percent came from central funds and the rest from the defense budget, according to an e-mailed statement from the ministry last night that did not mention the Typhoon sales plan.
Further budget savings of more than 100 million pounds have been found by renegotiating contracts with existing military suppliers. More than 500 contracts will have been renegotiated by the end of the year, the person said. The ministry has also cut costs by reducing its liabilities for equipment maintenance contracts and adjusting the costs of depreciation.
Other savings will be found by cutting marketing budgets, reducing the number of civilians the ministry employs and selling parts of the broadband spectrum currently owned by the ministry but no longer needed.
Fox’s Conservative Party blames the previous Labour administration for creating the shortfall in the defense budget. Labour has called repeatedly for Fox to re-examine the cuts.
“The problem with the government’s security and defense review is that it hasn’t survived the first contact with world events,” Murphy told the BBC. “The fact is that HMS Cumberland -- the Royal Navy ship and the crew that are doing marvelous work off Libya -- it was its last journey, it was on the way to be scrapped.”
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