Sunday, May 13, 2012

End of the black hole?

Defence Minister Philip Hammond revealed on Sunday that he has "balanced the MOD books", and eliminated the infamous budget black hole. He is expected to make a formal announcement in Parliament this week (will it be the release of Planning Round 2012, finally?), but has already anticipated that:

"In terms of reducing the size of the Civil Service, the Army and the Air Force, we shouldn't have to do any more over and above what we've already announced."

Which is a very relieving thing to hear, especially since the cuts already announced are huge and we have reached the point in which any additional reduction mutilates the UK's possibilities forever.
He also announced that there will now be a reserve of cash in each financial year at the MOD, to be used to immediately sort out unexpected cost growths and complications.

"For the first time in the defence budget we've got a reserve in each year, which means that if something comes up we'll be able to manage it," 

It is an absolutely welcome development, and we all hope that his words prove true, and that the age of constant, daily emergency is over, giving the armed forces the chance to more rationally plan and acquire kit for the future.

The full pain of the budget cutting and forces reduction is not yet revealed, due to the fact that an announcement on Army structures is still missing. This is expected to be a controverse and very painful announcement, with lots of bad news.
Among units certain to be hit, we have the Royal Gurkha Logistics Regiment and almost certainly the 5 Scots battalion, Argyll and Sutherland Highlanders. The 4 Scots, the Highlanders, is also reportedly at risk: it appeared that both would be cancelled, but lately it seems that, in place of 4 Scots, it will be the tank regiment Royal Scots Dragoon Guards the other unit to go.
Discussions have also been ongoing on the future of Guards units, mainly on the future of the Coldstream, the oldest regiment in the Army, but reportedly also on the Scots guards. David Cameron is said to be, however, (understandably) not very eager to cut the Guards in  the year of the Jubilee, and anyway not ready to face the backlash that would follow such an unpopular move.

Waiting for the next announcements, we can at least note with some relief that Hammond has admitted that the defence budget has been cut “as far as it is prudent to do so” (and indeed more, i'll add) and the budget will need to grow as promised.
In this sense, Hammond said he talked personally with George Osborne, and received assurances that the MOD will not be subject to further calls for savings. Despite the announcement that at least 2 more years of austerity will be needed, up to 2017, the Treasury has confirmed that the MOD will get the promised 1% growth in the Equipment budget, and the rest of the budget will stay, at least, flat in real terms, or maybe will even grow slightly.

Unfortunately, in the middle there's an Election, and an SDSR, so much could still change when a new government is formed.
However, if the MOD will be on balance by then, whoever will try to enforce further draconian cuts on defence will not have the "black hole" excuse anymore, and will have to directly shoulder all the blame


  1. BertramPantyshieldMay 13, 2012 at 11:41 AM

    One thing I don't understand is where the £2.1 billion surplus that was reported went. The government ordered the 8th C-17 off the back of it, and I hoped it would pay for conversion of the second carrier. Is this the contingency reserve?

    Frankly, though, it's baffling that no reserve has existed prior, particularly with a budget which has consistently experienced overruns. If one had existed previously we could have saved over £1 billion by not delaying the carriers- enough to pay for the harrier fleet to keep going until JCA turns up. Still, that's expecting a modicum of intelligence and organisation...

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