An additional 3,000 civilians will be axed from the Ministry of Defence after ministers realised the department’s “black hole” – the gap between revenue expectations and spending commitments – was bigger than previously thought.
This “black hole” has become one of the government’s most effective examples of Labour profligacy versus coalition (especially Conservative) fiscal discipline. But in truth, we’ve never really known how big it is or how close it is to being eliminated.
It is generally reckoned that when the coalition came in, there was a £10bn gap that needed closing over the course of the parliament, but the total overspend on existing projects could eventually be as high as £38bn. Read more
Just over a week after leaving office, Liam Fox has returned to the spotlight, giving an interview to BBC Bristol defending himself and attacking the media.
Talking about his meeting in Dubai, attended by Adam Werritty but no civil servant, Fox said:
I think it was really just a mistake not to have somebody there but… we were sitting in a coffee lounge in a hotel, it was hardly a high security meeting.
But nonetheless, given this was a potential defence supplier – not as it turns out an actual defence supplier – it still should have had somebody there. It’s very easy to be careless but you pay a price for it.
There was an intriguing report this morning on civilsociety.co.uk (no, me neither, but stick with me) about a technical, but significant change to the way in which the Charity Commission investigates charities.
According to the report, Kenneth Dibble, the commission’s head of legal services, told an audience of charity lawyers that it would stop carrying out so-called “regulatory compliance investigations” – the type of inquiry that snared Atlantic Bridge, the charity set up by Liam Fox and run by Adam Werritty.
The commission found earlier this year that Atlantic Bridge’s activites were more political than charitable, and rather than face the consequences of that (such as having to pay more tax), the charity shut down. Read more
Here is what Liam Fox wrote to David Cameron:
As you know, I have always placed a great deal of importance on accountability and responsibility. As I said in the House of Commons on Monday, I mistakenly allowed the distinction between my personal interest and my Government activities to become blurred. The consequences of this have become clearer in recent days. I am very sorry for this.
One of the many mysteries surrounding the Liam Fox/Adam Werritty controversy is what exactly Sir Gus O’Donnell, the cabinet secretary is supposed to be investigating.
Sir Gus took over the internal investigation into the relationship between the two men and their links with defence contractors earlier this week, but as yet, no terms of reference have been published.
Number 10 has told us repeatedly, “All unanswered questions will be answered.” Read more
Liam Fox this morning sought to kill off an uncomfortable story by asking his permanent secretary to investigate whether he has breached the ministerial code over his dealings with his friend Adam Werrity.
The defence secretary is under pressure over the fact that Mr Werrity – best man at his wedding – was handing out cards calling himself “adviser” to Mr Fox, arranging meetings and attending sensitive events. Read more
This afternoon’s defence select committee on the strategic defence and security review began on a sour note.
Like an errant schoolboy, or rather the best friend of an errant schoolboy, armed forces minister Nick Harvey was forced by James Arbuthnot, the committee chair, to explain why it was he and not his boss in the hot seat. Read more
The question of whether Gaddafi is a target for airstrikes has hung over the Libya campaign. The convoluted explanations from ministers can appear dry and legalistic. That’s because they are. But it is worth imagining the terrible indigestion this causes Foreign Office lawyers.
The problems started the moment General Sir David Richards said the Colonel was “absolutely not” a target under the UN resolution.
Since then, there have been strikes on command and control facilities in Tripoli. In public ministers have been opening up a bit, offering a slightly less legalistic response to questions. Take this quote from Liam Fox from an interview on the PBS NewsHour on Tuesday:
“If you look at it from Gadhafi’s point of view, [this] has been something happening at arm’s length, something happening in Misurata, something happening in Ajdabiya or out towards Benghazi.
What we’ve seen in recent days [is] attacks on Tripoli to increase the psychological pressure, apart from anything else, on Gadhafi, to make him realize that this is something that he is involved in.”
Sounds rather targeted to me. Read more
The Ministry of Defence is always strapped for cash but never short of intrigue.
Remember the urgent police inquiry that Liam Fox launched after a mole gave the Daily Telegraph his letter warning David Cameron about “draconian” cuts? Read more
Does the defence review add up? The head of the RAF has today given us an important insight into the maths. He has made public that David Cameron’s vision for the armed forces in 2020 is only affordable if you assume the MoD budget rises every year after 2015 by around 2 per cent above inflation.
For those of you who don’t think it sounds much, a five-year military settlement as generous as that was last granted in the early 1980s.
Is the rise a realistic basis for planning? A prudent approach? Should we really count on a military spending boom after 2015?
This review was, after all, supposed to balance the MoD books. Yet it looks like we’re back to buying kit on the never-never. Officials tell me the cumulative unfunded liability — if you take the usual planning assumption of the budget rising in line with inflation after 2015 — stands at £13bn to £15bn over the coming decade.
Coalition aides say this is completely different from the “black hole” they say they inherited from Labour. It all comes down to this statement given by the prime minister in the Commons:
“My own strong view is that this structure will require year on year real-terms growth in the defence budget in the years beyond 2015.”
On the basis of this “strong view”, Liam Fox’s team think it is realistic and reasonable to at least plan on the basis of real terms increases to cover their spending commitments. Defence chiefs also welcomed Cameron’s “strong view” of the future — but they are still pushing for a more “bankable” pledge. They want George Osborne to guarantee an annual uplift beyond 2015, a request that some Treasury officials will treat as light comedy. I don’t think such a guarantee has ever been given to a department. Read more
David Cameron took the biggest delegation to India since the Raj in an attempt to revitalise relations. But, impressive as it was by UK standards, the trip has clearly not provided much of an aide-mémoire for Manmohan Singh, India’s prime minister.
Here is a telling dispatch from James Lamont, the FT’s man in New Delhi: Read more
David Cameron aimed a broadside at the Ministry of Defence today (and by proxy at Liam Fox).
“That department does seem to have had a bit of problem for leaks which is worrying when that department is responsible for security.”
On one level this is fair enough. Leaks are extremely unsettling for ministers and senior officials.
But at the MoD, the problem hasn’t been leaks. It has been a willingness to cover up uncomfortable truths. How else did it end up with a black hole of £36bn? Some more transparency — whether authorised or not — would only have been beneficial.
The coalition certainly believes this in principle. But when transparency makes life difficult for them rather than Labour, they struggle.
Take James Kirkup’s excellent scoop today. Fox’s reaction was to say that it was written by a “junior official” and that it had not “been authorised, requested or seen by an MoD minister”.
Which begs the question, why not? Why didn’t ministers see this well argued, plainly written and insightful critique of the most important defence review since the Cold War? Read more
The spending review did not end in the way most people expected. When Cameron’s top team gathered around the Chequers table on Sunday to tuck in to roast lamb and Yorkshire puddings, there was virtually no talk of squeezing out extra savings to balance the books. They had money to spare.
This was not the impression given to the rest of the cabinet, or indeed the BBC. But the truth was that the Treasury was sitting on a small cash-pile. After agreeing all the big budgets, there was £1bn or more left in the emergency fund for the quad — Cameron, Clegg, Osborne and Alexander — to distribute.
“They went from the horsemen of the apocalypse to Father Christmas overnight,” said one official close to the final days of the spending negotiation.
This back of the sofa discovery is a feature of spending rounds. The Treasury always set cautious targets so there is some flexibility at the end. But how Cameron handled the mini windfall is revealing. It gives us an insight into both his priorities and the methods he used to bluff the BBC into paying for the World Service. Read more
Has Michael Gove’s discreet approach to budget negotiations paid off? Education bravely resisted the shroud waving that marked the defence review. But it looks like Gove has emerged with a better deal than Fox, at least in terms of his resource budget.
We already know that schools spending — based on the Ed Balls baseline — will rise in real terms (albeit by a tiny amount). Today’s surprise will be that the education department will win the best settlement of all the unprotected departments. That means its resource budget will be cut by less than the 7.5 per cent imposed on defence. When it came to a stand-off between kids and frigates, the kids appear to have prevailed.
Now, as with all settlements announced today, the headline figure mask a great deal of pain. Spending channelled through local authorities (such as children’s services) will suffer. So will spending on 16 to 19 year olds. And of course the resource settlement does not include the education capital budget, which is about to be thumped. Read more
It is impossible to judge the defence review without seeing the full budget breakdown, available only to government officials. But even with the information we now have, it is pretty clear that some assumptions are incoherent. Some plans just don’t add up. The most obvious issues are with the shape of the army after 2015.
There may be big troop cuts hidden in this review that Cameron just didn’t want to mention.
1) The mystery of Britain’s 29,000 surplus troops in 2020
At the moment Britain’s 110,000 strong land forces can sustain a deployment of around 10,000. By 2020 this enduring deployment will fall to brigade level, which amounts to around 6,500 men.
This is basically an admission that we will be unable to sustain as big a role in the next Afghanistan or Iraq.
But more curious is the fact that we’re not cutting the land forces by as much as we’re cutting the deployments we expect them to sustain.
The “force generation” ratio — the proportion of troops to boots on the ground — will actually deteriorate over the next decade according to the defence review, even though Liam Fox has ordered a separate review on how to improve it. Read more
It is now received wisdom in Westminster that Liam Fox emerged victorious from his battle with the Treasury over defence funding.
The official history has David Cameron making a last minute intervention to boost defence spending, particularly for the army. The Treasury were only able to secure cuts of around 8 per cent in real terms, rather than the 10 per cent cuts they were pushing for.
The alternative interpretation is that Fox was short-changed and that this will become clear in the months ahead. The argument runs in two parts: Read more
The competition is fierce. But this must be a contender for the worst question ever asked — or should I say not asked — at a select committee hearing.
Just take a look at James Arbuthnot’s forensic examination of Liam Fox’s position on the withdrawal of troops from Afghanistan: Read more
Last night’s Question Time ended on an extraordinary note. The public are more in favour of a hung parliament than the Tories care to admit. But I never expected an audience to heckle and boo Liam Fox when he warned of an indecisive election result triggering a run on sterling.
You can watch it here — the mob turn on Fox around 58 minutes in. Read more