Formally, the shots have yet to be fired in the battle for Whitehall spending cuts, but the Treasury has already set the terms of its looming battle with the Ministry of Defence. A little-noticed but ominous sentence in the new coalition programme has put the armed forces on notice that the axe is about to cut even more deeply than they imagined into the defence budget.
Whitehall insiders are predicting a programme of retrenchment as significant as that marked by the withdrawal “East of Suez” announced by Harold Wilson’s government in 1968. Then, as now, the trigger was a crisis of international confidence in the nation’s finances.
Before the election the Conservatives insisted that the coming strategic defence review would be “foreign policy-led” – the government, in other words, would make sure that defence spending matched Britain’s aspirations to be a player on the global stage as well as the requirements for defence and security at home. William Hague and Liam Fox were as one that the MOD budget would not suffer arbitrary Treasury cuts.
The coalition agreement, however, makes it clear that George Osborne has won the important opening skirmish. The defence review, the agreement says, will be overseen by the New National Security Council “with strong Treasury involvement”. There is no mention in the document of the Foreign Office or of any commitment to match MOD capabilities to the government’s international aspirations.
The word among Whitehall insiders is that foreign and defence policy priorities will now have to fixed around the financial realities rather than vice versa. The Treasury’s long-held view that most defence spending is wasted promises a particularly bloody fight.
The one ring-fenced line in the budget is the cost of the war in Afghanistan. Having excoriated Gordon Brown’s government for allegedly failing to give the troops on the ground the equipment they need the parties in the new coalition can hardly skimp themselves. Otherwise, all but the nuclear deterrent is in the Treasury’s sights.
The heads of the armed forces will now understand why David Cameron had them to lunch during his first weekend at Chequers. The prime minister’s message? “I’ll need your support”.