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Britain’s Ministry of Defence has asked all its major industry suppliers to identify opportunities for immediate budget cuts, in the latest sign of the financial pressures facing the new Labour government.
Civil servants from the department wrote to defence contractors on Monday, asking them to respond with a range of options imminently, in order to help counter what they described as a “significant in-year fiscal pressure”, according to several people familiar with the letter.
While the request could lead to some defence programmes being delayed, the letter said that officials were “particularly keen” to hear about areas where “we could drive out duplication and waste to our mutual benefit”, one of the people confirmed.
“There was no list of demands,” the person added. “They wanted initial ideas.”
Companies were told the MoD needed to make some “hard choices” that “align to this government’s target of spending 2.5 per cent of GDP on defence”, according to the letter. Any savings would have to ensure that “military capability” was preserved.
Although companies were asked to respond imminently, the expectation is that discussions on how to implement any savings will take place throughout August, said one of the people.
The request for budget cuts, which was first reported by the i newspaper, is separate from the wider defence review launched by the Labour government after it won the general election in July.
It comes amid rising expectations of tax increases this autumn as chancellor Rachel Reeves tries to find savings to fill a £22bn fiscal hole she claims to have inherited from the former Conservative government.
Even before Labour took office, the MoD’s budget faced repeated scrutiny. The National Audit Office last year branded the department’s equipment plan for Britain’s armed forces as “unaffordable” and warned that it faced its largest black hole in more than a decade.
The NAO said in December that the MoD estimated a shortfall in its budget for new weapons and equipment over the next 10 years of £16.9bn — the largest deficit in the department’s annual 10-year forecasts since they were first published in 2012. Since then, rising inflation has only added to the budget strains.
A spokesperson for the MoD said: “As the chancellor has said, the government has inherited public finances which are much worse than expected.
“The NAO has also confirmed the largest ever deficit in the defence equipment plan. This government will secure Britain’s defences for the future and increase defence spending to 2.5 per cent of GDP as soon as possible.”
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