http://www.timesonline.co.uk/article/0,,2-1032539,00.html Services can't survive 'death by 1,000 cuts' By Tom Baldwin and Michael Evans Hoon goes over Brown's head with defence cash appeal to No 10 GEOFF HOON has written to Tony Blair complaining that Treasury demands for a £1.2 billion cut in defence spending plans will put at risk “current and future” military operations. The Defence Secretary’s letter on Monday is being seen by Downing Street as a direct appeal, over the head of Gordon Brown, for the Prime Minister to intervene in what has become an acrimonious Whitehall row. Ministry of Defence officials are understood to have given a warning that up to “a thousand cuts” in operational budgets will be needed next year to meet the £1.2 billion savings being asked for by the Treasury. Measures already identified would include scrapping winter exercises in Norway for the Royal Marines, fast-jet training by RAF pilots, the grounding of certain aircraft and leaving navy ships in port to save on fuel costs. General Sir Michael Walker, the Chief of Defence Staff, as well as the heads of the three Armed Services, are understood to have repeatedly told Downing Street about their “profound unhappiness” over the proposed cuts. They point out that Britain’s substantial military commitments across the world, notably in Iraq, Afghanistan and the Balkans, were not envisaged when the Government completed its Strategic Defence Review during the last Parliament. Although this blueprint has since been updated, the defence chiefs are understood to have said that spending constraints on the scale demanded by the Treasury would make “current and future operational commitments unmanageable”. Such warnings come at an acutely sensitive time for Downing Street, not least because Mr Blair has made a priority of maintaining good relations with the Armed Forces throughout the past year, which has tested his interventionist foreign and defence policy almost to destruction. The row also threatens to undermine Labour’s general election plans to highlight Tory proposals which, it claims, would cut defence spending by £1.5 billion over two years. Although the Chancellor allocated out of contingency reserves an additional £3 billion to the MoD for the Iraq war, defence chiefs believe that even this operation could be damaged by spending cuts. They fear that scrapping training programmes would leave service personnel replacing those in the Gulf ill-prepared for active duty, as well as undermining morale. Mr Blair has been told that Britain’s capacity to respond to future global crises would also be impaired. For instance, the Royal Marines winter exercises are regarded as essential for fighting in mountain areas — such as those found in Afghanistan. The Treasury is incredulous that there should be a sudden funding crisis after giving the MoD its biggest budget increase for 20 years during the last spending review in 2002. Mr Brown’s three-year settlement represents a cash-terms increase of £3.5 billion in defence spending by 2006. The MoD budget is rising from £29.2 billion this year to £30.7 billion in 2005-06, but much of this is on fixed costs such as salaries which account for more than 35 per cent of total spending. MoD officials have sought to exploit new Treasury resource accounting rules so that money can be found to pay for military operations. By keeping old equipment in service longer, the cost of depreciating assets were lower and the MoD could get extra cash while staying within overall spending limits. The Treasury believes this “creative accounting” is the type of breach in spending rules which it cannot allow if the Government is to avoid increased public borrowing and tax rises ahead of the next election. The MoD has responded by commissioning an independent audit of its accountancy procedures which, it claims, show officials have acted within the rules for private firms. But Mr Brown has remained adamant that he will not allow extra MoD spending with his aides privately complaining about Mr Hoon’s “brinkmanship”. The current impasse has caused dismay within the armed services, each of which has been asked to find scope for instant cuts. Defence sources said that it was one of the most painful exercises ever undertaken because the only areas that can provide guaranteed short-term savings have an unavoidable impact on servicemen and women. Some training exercises have already been cut back, but the Service chiefs argue that if Britain’s Armed Forces are to continue to be the “force for good” around the world — as outlined in government strategy for the Services — their “people” need to be trained and equipped for every type of operational commitment. The Services have to have a certain number of units on “high readiness” which makes training imperative. Cancelled exercises can save several million pounds, but, it is argued, it undermines the overall effectiveness of the fighting troops. Service chiefs say they are now having to turn to other areas such as equipment programmes. However, it is possible that suggested cuts might be politically unacceptable, such as a reduction in the number of Eurofighters for the RAF, as Britain is committed to that programme along with Germany, Spain and Italy, and there would be penalties both for the British taxpayer and for industry.