Boris Johnson has told Rishi Sunak that he wants a £15 billion multi-year settlement for defence in a clash over the scale of spending to strengthen Britain’s place on the world stage after Brexit.
The
prime minister met the chancellor on Tuesday to discuss the issue and has demanded he guarantee defence spending until 2025 to underpin a defence and security review.
Mr Sunak wants a one-year settlement for defence worth £1.9 billion as part of the spending review.
A source said: “The prime minister and Dom [Cummings, Mr Johnson’s adviser] think that the issue is pivotal to Britain’s place in the world after Brexit.”
Another source said
Mr Cummings, who has worked intensively on the review, is “***ing furious” about the decision for a one-year settlement. He and Ben Wallace, the defence secretary, are pushing for a multi-year settlement.
A Whitehall source said that Mr Johnson and Mr Sunak were still “miles apart” after their meeting on Tuesday. A meeting between Mr Johnson, Mr Sunak and Mr Wallace scheduled for the following day was cancelled.
It leaves Mr Johnson and Mr Sunak with only weeks to resolve their differences on the issue before the comprehensive spending review on November 25. One government source raised concerns that the Treasury is attempting to “run down the clock”.
There are differences but it is not thought to be a “stand-up row”.
“That’s not how Rishi and Boris work,” a source said.
There are concerns that the review will be “pointless” without the funding to underpin it. Mr Wallace told a conference: “Our adversaries will not halt [in] the absence of our strategies, and the UK’s defence can never be paused in the face of financial uncertainty.”
The Ministry of Defence is facing a black hole of up to £13 billion in its ten-year budget for equipment. Defence chiefs believe urgent investment is needed in
new technologies, including offensive cyberweapons, space capabilities, electronic warfare, swarming drones and stealth materials.
Analysts warn that without a cash injection agreed now for the early years of the sixth-generation “Tempest” fighter jet programme and the future nuclear warhead, the lifetime costs of these initiatives will soar and they could be delayed until the 2040s.
However, defence economists said that a four-year settlement of about £15 billion would help solve the most pressing financial concerns.
The government confirmed this month that it was replacing a planned multi-year spending review with a pared-back round next month that will give most Whitehall departments one year’s cash for day-to-day spending.
“In the current environment it’s essential that we provide certainty,” Mr Sunak said. “So we’ll be setting budgets for next year, with a total focus on tackling Covid and delivering our plan for jobs.” Funding for the NHS, priority infrastructure and schools are multi-year.
Paul Johnson, director of the Institute for Fiscal Studies, said that Mr Sunak was right to press for a one-year settlement. “Normally it makes sense to give departments the certainty of a three or even four-year settlement but not this time. We don’t know where the economy will be in a year’s time.”
The integrated review is central to Boris Johnson’s post-Brexit “Global Britain” vision (Lucy Fisher writes).
He is keen to avoid delaying the overhaul, which will flesh out the nation’s military presence “east of Suez” from next year.
Defence chiefs were left with underfunded, over-ambitious plans by the previous two reviews. The Ministry of Defence has a funding black hole of up to £13 billion in its ten-year kit plan, and deferring investment tends to push up lifetime costs. A degree of certainty, derived from a multi-year funding settlement, would let it grasp the nettle on cancelling some initiatives and press on with others.
In the shorter term, Britain risks falling behind in the global technological arms race. MI6, MI5 and GCHQ are calling for new software. Conventional military capabilities, which underpin the UK’s Nato contribution, also need updating. A multi-year settlement is needed to work out what cuts and new capabilities are required.
Modernising the military chimes with No 10’s plans to boost the science, space and technology industries, which underpin high-skilled jobs. The appeal of ticking off a manifesto pledge to modernise the armed forces is also obvious.
Yet the case for delay remains strong. With the deficit at £350 billion and the pandemic far from over, a multi-year settlement would be a painful promise for Rishi Sunak to make.
Coronavirus is also reshaping geopolitics. Until the dust settles the strategic context that should form the foundation of a review remains unclear.