Analysts are starting to work through the implications of the looming squeeze on departmental spending. Whitehall is bracing for job cuts, but the raw numbers are still quite stark.
Take defence. George Osborne promised to spare the MoD from part of the 25 per cent cuts. But even a flat cash settlement — of 10 to 15 per cent cuts — would place heavy strain on the budget.
Malcolm Chalmers at RUSI has calculated what a 15 per cent cut would mean for personnel.
If, as our central scenario suggests, total real spending on personnel falls by around 13%, total personnel numbers would therefore have to fall by around 15% by 2014. Total personnel numbers would then be reduced from 283,000 to 240,000. If spread proportionately, this would lead to a 30,000 cut in military personnel numbers, together with a reduction in civilian personnel numbers of around 13,000.
At a time of war, announcing 43,000 job cuts is politically toxic. The MoD is no stranger to shedding staff — the size of the Defence Equipment and Support group in Bristol has fallen by more than 10,000 over the last few years. But the squeeze on numbers this time will be of a different order. Given around 40 per cent of the budget is staff costs, there is little alternative.
In another insightful paper on the defence budget, Chalmers noted that the pace of these changes will depend on a) a drawdown in Afghanistan and b) the Treasury’s willingness to pay upfront for long term savings.
Without this budget flexibility in the early years, he warns that some bad decisions may be taken:
The deeper the immediate cuts that the MoD is asked to make, moreover, the more that will have to be spent on up-front transition costs (redundancy payments and penalties for cancelled contracts), thereby risking destabilising capability reductions without the achievement of
commensurate financial gains.