Spending Review: Ministers agree MoD budget cut

Royal Marines The government will be announcing its defence review next week

Cutbacks in the UK's £37bn annual defence budget have been finalised ahead of the chancellor's Spending Review, the BBC understands.

The reduction is expected to be less than the 10% the Treasury had been seeking, possibly around 8%.

The Army is expected to have to cut personnel, although the Navy will get two new aircraft carriers.

Labour accused ministers of trying to "soften up" the public by talking about big cuts, then backing smaller ones.

Details of spending cuts are due to be published on Wednesday.

It is thought the new ships will have fewer new aircraft and the overall size of the Navy's fleet will be reduced.

It is believed that the Joint RAF/Fleet Air Arm Harrier force may face the axe, while some squadrons of RAF Tornado jets could be saved instead - although some air force bases will close.

The Army may have to cut up to 7,000 or so personnel over the next five years, while the MoD itself could face substantial cuts to its civilian staff.

Sources say £750m will be saved over four years on the Trident nuclear deterrent missile system but it is not yet clear how those savings will be made.

BBC defence correspondent Caroline Wyatt says the MoD still has a £38bn black hole in its procurement budget - inherited from the previous government - which means the cuts need to be deeper than the headline figure suggests.

Speaking on BBC Radio 4's Today programme, Michael Clarke, of the Royal United Services Institute think tank, said Army numbers had to be cut.

Analysis

It has been a gruelling five months for those involved in the strategic defence and security review but, in many senses, it is far from over.

Given that one of the original options requested by the Treasury from MoD civil servants and the armed forces was the details of what 20% cuts would mean for defence, with another option for 10% cuts, this will be seen by many - especially within the MoD - as a victory for Defence Secretary Liam Fox and the defence chiefs.

However, the MoD has inherited one of the worst legacies of any department from the previous Labour government in terms of budget - an unfunded liability or 'black hole' of £38bn over the next decade of equipment which has been ordered but for which there is no cash.

That means that the pain for the MoD will be greater than the headline figure suggests, and so many people in defence are likely to face continuing uncertainty - even after the SDSR is published - as to what the future holds for their job, their base, their project or their unit.

But that would not happen before 2015, when a withdrawal from Afghanistan would be under way, he said.

Mr Clarke described the defence cuts as a "bell-weather" for Nato, which would be watching closely to see where the axe fell.

On the same programme, former First Sea Lord Admiral Lord West said: "Politically, I can understand how the government finds it difficult to cut Army numbers when our soldiers are dying in Afghanistan."

He said that "strategically it would make sense" to cut numbers by 20,000.

'Can live with'

There has been intense debate inside government about where the cuts should fall within the defence budget.

Initial demands by the Treasury were for reductions of between 10% and 20%, with many options put before the National Security Council.

Earlier this week it was believed at the MoD that a settlement was close at about 7%, but the Treasury came back demanding cuts of 10%.

Military chiefs said that would damage the front line in Afghanistan, something Mr Cameron had previously made clear he was not prepared to do.

Colonel Richard Kemp, a former British commander in Afghanistan, said: "We will probably now get a fairly vague announcement this week and then a number of quieter readjustments to it over the next few months."

He said there was a huge amount of "corrosive" uncertainty about the future of the armed forces which was "potentially a real morale problem".

Shadow defence secretary Jim Murphy: 'This is no way to run a defence review'

Col Kemp also said he felt Britain could no longer afford the aircraft carriers which he claimed had been promised as a sop to the Navy.

Shadow defence secretary Jim Murphy accused the government of deliberately leaking the news of 8% cuts, saying the Conservative leadership was "playing games".

"This is no way to run a defence review," he said. "The question that is now in our minds is, is it 7%, is it 8% or is it 9%? Those are the wrong questions.

"The question is: what is the future of our defence structure? What is our future foreign policy? What's our role in Nato in the future? What is our relationship with European allies? How do we deal with global terrorism?"

The BBC understands that both planned aircraft carriers, HMS Queen Elizabeth and HMS Prince of Wales, will be built - but the Royal Navy stands to lose a significant portion of its surface fleet, while the order for the joint strike fighters for the carriers will be scaled down substantially.

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A special BBC News season examining the approaching cuts to public sector spending

The carriers are being constructed in sections in Scotland, Portsmouth and north Devon.

Speaking on the Today programme, Lord West said he would be "delighted" if the two carriers were built.

"They provide four-and-a-half acres of British sovereign territory with no over-flying rights, we don't have to put troops on the ground with all the risks of terrorism and so on, and we can influence the world and keep a stable globe, which is very important for our wealth in this country," he said.

But Scottish National Party MP Angus Robertson, who was two RAF bases in his Moray constituency, said any cuts would be bad news.

"What we can read between the lines is, that the larger service in Scotland, which is the RAF - bigger than the Navy, bigger than the Army - is going to be hit disproportionately.

"So, Scotland is going to come out of this SDSR [strategic defence and security review] badly," Mr Robertson added.

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