I can hardly see a government as obsessed with spin as this one (or Gordon Brown's administration, since it'll have the same array of media advisers) getting rid of the Red Arrows.
Stop and think for a moment about which parts of the RAF the average voter - who constantly claims pride in all three services when polled - is aware of. The answer is, in no particular order - the Red Arrows, the Dambusters [extra point for them if they can give the squadron number] and the BBMF.
The likely scenario would be -
1. recommendation to disband Red Arrows reaches minister.
2. Minister confirms his suspicion that this would be very bad
PR with his press team because polling suggests that the public have positive views on the Red Arrows.
3. Minister tells CAS to chop something else (adding 'and don't even think about saying 'the Battle of Britain Memorial Flight', Air Chief Marshal').
Brown and Browne may know little about defence, but they have sufficient imagination to realise how scrapping the Red Arrows would play in the tabloids.
Can you seriously imagine them being prepared to contemplate the front page of the Sun screaming out 'Brown Scraps Red Arrows: RAF Heroes chopped through lack of money' - particularly at a point when the Chancellor is endeavouring to cast a positive image of himself with the public? It may make operational sense, it may mean that the funds saved (if not clawed back by the Treasury) would be better used on the front line, etc, etc - but whether or not this is the case, it matters not a jot if that would negative publicity for the government.