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More demands on George Osborne

8 April 2011

9:11 AM

8 April 2011

9:11 AM

Is the defence budget the most chaotic in all Whitehall? George Osborne said as much last October — and he’s still dealing with its hellish intricacies now. The main problem, as so often in military matters, is
one of overcommitment. Thanks to various accounting ruses on Labour’s part, large parts of the MoD’s costs were hidden in the long grass of the future. It was buy now, pay later — with Brown
doing the buying bit, and the coalition doing the paying. The number that William Hague put on it last year was £38 billion. The
MoD was spending £38 billion more, over this decade, than had been budgeted. Even after the cuts, elements of that overspend were likely to remain.

Which is why this story from today’s Telegraph is worth reading in full.
It tells us how David Cameron has decided to deal with this year’s MoD overspend: rather than asking for more cuts to make up the £1 billion shortfall, he has granted the department a
reprieve. They will be given funds from the Treasury’s special reserve fund, among other measures, to help carry them along. This generosity is said to have been inspired, in part, by the Libya
conflict.

The Telegraph draws an important implication from this: that the defence budget might be open to reassessment, year by year. But it also tells us a lot about the close atmosphere that Osborne is
operating in. We have already seen how his budget plans can be unsettled by
inflation
. Throw in all these extra, unexpected costs, and the Chancellor has even less room for manoeuvre. Any tax windfalls in future may simply have to go towards consolidating his existing
deficit reduction plan.


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