[A-List] UK sub-imperialism: fiscal crisis

[Michael Keaney]

Blair and Brown attack Hoon for 'overspending' at MoD
By Andrew Grice
The Independent, 11 March 2004

Tony Blair and Gordon Brown have rebuked Geoff Hoon after he pleaded for
extra money for the Ministry of Defence. They told him to get a grip on his
department by finding savings.

The Prime Minister and Chancellor reacted angrily yesterday after it emerged
that the Defence Secretary had written to Mr Blair warning that Treasury
demands for a cash squeeze on the MoD would put current and future military
operations at risk. The appeal marked the first skirmish in what will be a
tough negotiation before a three-year spending blueprint to be published in
July.

Mr Brown is seething because he believes the MoD has failed to meet its own
targets to increase its efficiency and prevent overspending on expensive
procurement projects, on which its record has been criticised by public
spending watchdogs.

Downing Street and Labour aides were furious Mr Hoon's move could blunt the
party's attack on the Tories' plans to freeze defence spending, which Labour
claims will mean a cut of £1.5bn over two years. Mr Blair wants to make
"Tory cuts" the "dividing line" between the two main parties in the approach
to the general election.

A government source said last night: "When the 2002 spending review
delivered for the MoD its biggest settlement for 20 years, it trumpeted it
as a massive victory against the Treasury. Now it is claiming it is being
cut. It is Oliver Letwin [the shadow Chancellor] who wants to cut the MoD's
budget, not the Government. Yet, instead of scrutinising the Tories' plans
for defence, Geoff Hoon is attacking his own side."

Government sources dismissed reports that the MoD may have to cut its budget
by £1.2bn as "not true" but reflected the Treasury's long-standing
frustration about what it called "management difficulties" at the MoD. That
is believed to refer to significant cost overruns on big projects and a
failure to cut adminstration costs so that money could be switched to the
armed forces.

One source said: "It would be irresponsible not to ensure the money is being
spent properly and frontline forces are being properly equipped to do the
difficult and dangerous job we ask of them."

The public dispute is embarrassing for Mr Blair, who is determined to ensure
British forces are adequately funded. The Treasury found an extra £3bn for
the Iraq war but MoD chiefs claim the continuing operation in the country
could be jeopardised by the squeeze they face during the spending review.
The defence budget is due to rise from £29.2bn this year to £30.7bn by
2005-06.

Mr Brown will announce the total public spending figure for the next three
years in his Budget next Wednesday. The Chancellor will seek to allay fears
that he faces a "black hole" in his finances which would force him to raise
taxes after the general election, expected next year.

The MoD is vulnerable to a squeeze because big increases in the health
budget to 2008 are already guaranteed and the Chancellor will want to give
priority to education and other public services.