The Treasury will have a significant impact on the outcome of the forthcoming Strategic Defence and Security Review, senior defence officials have conceded – despite assurances from the government that the exercise will be driven mainly by an assessment of UK foreign policy needs.
As the Ministry of Defence presses ahead with the review, the first for 12 years, senior Whitehall officials say they are still waiting for the government to spell out how the exercise will be conducted.
But there is a growing assumption across the MoD that the SDSR will be heavily driven by the need to scale back UK defence spending during the next three years.
According to one MoD official, Liam Fox, defence secretary, is still insisting that the SDSR will be a full and frank assessment of the defence and diplomatic role the UK should play in the years ahead.
But a senior armed services figure told the Financial Times that service chiefs were under pressure to give George Osborne, the chancellor, an assessment of their needs before his June 22 budget.
This is because the Treasury will give the MoD an informal assessment in the budget of its spending allocation during the next three financial years.
“We’re having to do the whole thing at far greater speed than we imagined,” said this figure. “We need to have our policy ambitions on the table no later than the middle of next month and we need to say what our room for manoeuvre is.”
Once the MoD receives the Treasury’s informal assessment of the three-year spending envelope next month, it will enter several months of negotiations with the Treasury before Mr Osborne’s autumn comprehensive spending review.
“The defence review will be the basis from which we make the arguments for more money,” said one defence figure.
“What I would hope for is that we end up with a defence settlement that sees ambition deferred – not ambition deleted. We accept that we will muddle on for a bit, but hope we can raise our game when times get better.”
One issue that has not yet been clarified is what role the new National Security Council will play in co-ordinating the SDSR.
MoD officials say that if the NSC seeks to become the main driver of the review, this could give Mr Osborne added leverage over the process because he sits on the NSC.
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