IMHO, Simple. Chancellor becomes PM. He knows that the next election is derived from the 'popular' vote, and Defence isn't it. Quite the contrary, it's a thorn in his side, what with IRQ and AFG and all that mess.
He will very quick distance himself from IRQ and AFG, and the Millitary in general. His stool, will be NHS and Education. Defence will quickly fall into the background, and when it does... it will get the biggest chop job ever seen. This will be justified by: Cohesion in Europe, extraction from IRQ and AFG since by then we will have pulled out.
I can envisage merges of services, European defence force ideas and the effective disbandment of 'regular' standing forces (vice SF which will get a boost).
Black days indeed. I really hope I'm wrong.
The good news is, we'll still have the Arrows, Royal Flight and BBMF.... but, that's pretty much all.
Just Dispondent,
Advo