Inflation-busting rise on defence spending blocked by Treasury officials, Whitehall sources reveal

The row comes as the Armed Forces are already preparing more cuts to meet Treasury efficiency targets of £20bn 
The row comes as the Armed Forces are already preparing more cuts to meet Treasury efficiency targets of £20bn. Above, soldiers after the Manchester terror attack

An inflation-busting rise in military spending is being blocked by Treasury officials in the wake of Theresa May's disastrous election campaign, Whitehall sources have revealed.

Officials are rejecting MOD calls to raise funding over 2 per cent of GDP, with some arguing the Conservative’s election failure means they are no longer bound by a manifesto pledge to grow military spending above inflation.

The row comes as the Armed Forces are already preparing more cuts to meet Treasury efficiency targets of £20bn savings in the next decade, to fund new ships, submarines, aircraft and vehicles.

A Westminster debate last week heard cross party calls for increased defence spending while a former head of the Army earlier this month called for the UK’s military budget to hit 2.5 per cent of GDP in the face of growing threats to the country.

The Tory manifesto vowed to meet Britain’s Nato commitment to spend at least 2 per cent of GDP on the Armed Forces and also to increase the budget by half a percent above inflation each year.

Sir Michael Fallon used the Tory Party conference to call for more money, saying the 2 per cent was “a minimum commitment, so we should aim now to do better than that. The threats to our country are intensifying.”

Yet worsening economic forecasts and the Chancellor’s commitment to ease public pay controls are understood to have left the Treasury with a shrinking campaign chest ahead of November’s autumn budget.

One senior Whitehall source said: “Things are going to be very tight. Economic forecasts are being lowered and that leaves the Treasury in a very difficult situation.

“Some people are saying the manifesto pledge to grow defence spending is no longer binding because the Conservatives didn’t win the election.”

Service chiefs are already braced for a string of further cuts. The forces are being asked to “live within their means” and come up with hundreds of millions of pounds of savings this year to unlock Treasury money.

The Government is also having to look again at its 2015 Strategic Defence and Security Review after the soaring cost of equipment, particularly nuclear submarines, coupled with the fall in the pound, has blown a hole in plans. Defence and security priorities are also being redrawn because of the growing threat from Islamist terrorists and the wave of attacks on UK soil this year.

Chiefs have warned the constraints will see them cut forces already reduced by decades of declining spending. The Navy has warned it may have to cut 1,000 Royal Marines, amphibious assault ships and several minesweepers, so it can keep it new carriers and guard Trident. The Army has drawn up proposals to slash large parts of the Army Air Corps.

MOD officials have hit back that there is still too much bureaucracy and duplication in the three forces that could be cut without affecting frontline forces.

Sir Michael Fallon used the Tory Party conference to call for more money
Sir Michael Fallon used the Tory Party conference to call for more money Credit: Carl Court/Getty Images

One source said: “The Army has got one clerk for every 17 soldiers for example. There’s no need for that these days.”

Lord Dannatt, former Chief of the General Staff, said earlier this month said he wanted to see money transferred from the ring-fenced aid budget to bolster military spending.

He said: “I would like to see it rise to two-and-a-quarter to two-and-a-half per cent. That's an extra three to five billion pounds. That would do quite a long way.

"If we can't afford, in the spirit of the nine or tenth year of austerity, to spend more than 2 per cent GDP on defence, I think I would question whether we can afford to spend 0.7 per cent of GDP on our international aid project.”

MPs from both sides of the House called for a hike in defence spending during a debate on Thursday called by Marcus Fysh, Tory MP for Yeovil.

He told the debate: "There are those who say we do not have the money. I wish a strong signal to go to the Treasury and Cabinet Office from this debate that it is a false economy not to give defence what it needs."

A Government spokesman said: “We are committed to spending 2 per cent of our GDP on defence and increasing the Ministry of Defence’s budget by at least 0.5 per cent above inflation every year.”

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