Heres an interesting one. http://www.defencemanagement.com/feature_story.asp?id=11327 From Defence Management.com The Treasury has taken steps to reduce the MoD's urgent operational requirement budget by up to 30 per cent next year in a move that will surely cause additional strains and pains in the ministry's budget writes Patrick Macgill. The MoD is facing a potential budget "time bomb" in the coming years after defence ministers quietly admitted that the Treasury had slashed urgent operational requirement (UOR) funding by nearly 30 per cent for the coming year. In a discrete written answer in January, Defence Secretary John Hutton revealed that the UOR budget for 2009-10 would only be Â£635m. Last year the UOR budget was Â£900m. The Treasury has funded the UOR budget as part of the reserve fund going to finance the wars in Iraq and Afghanistan. The fund allows for the MoD to procure urgently needed equipment such as newly armoured vehicles and bring them up to operational standards very quickly. Given the rapidly changing nature of the Taliban's tactics, the MoD has taken advantage of the UOR fund on numerous occasions in order to adapt to new threats. So far in the current year 2008-09, the MoD has spent over Â£1bn on UORs. Based on MoD estimates for the next financial year beginning in April, the total cost of UOR projects is expected to also top Â£1bn. However, in the current year all of the costs exceeding Â£900m are expected to be covered by the Treasury. This is not expected to be the case in the coming financial year. Under new Treasury rules, the MoD will have to pay back any costs exceeding the Â£635m fund two years from now. If the projections on UOR spending are correct, the MoD would therefore owe the Treasury Â£365m in the 2011-2012 budget. With the department's budget already stretched thin by minimal spending increases, two wars and a massive procurement budget, repaying the Treasury hundreds of millions of pounds that could be used for urgent priorities or operations will be problematic. It is not known how long MoD officials knew about the payback clause and whether they began to formulate their UOR spending requests for the coming financial year before or after the Treasury revealed the spending limits. The problem stems from the fact that the MoD's own budget is severely limited. Even high profile programmes such as the new aircraft carriers and FRES (Future Rapid Effects System) have not been immune to delays and in some cases, cuts. Funding for new programmes is hard to come by and often takes years from concept to delivery. Procurement officials as a result have formed a dependence almost exclusively on the Treasury's contingency and reserve funds for new equipment. If it can be used in current operations, the equipment can be procured under the UOR process. The UOR fund has produced a number of mainstays and highly regarded upgrades in the Armed Forces. Mastiffs and Jackals along with other armoured vehicles have been procured, up-armoured and introduced to operations in months in order to better protect troops from mines and improvised explosive devices. The Harrier force has received a number of engine modifications and new weapons systems to help it operate more effectively in the Afghan conditions. The vast landscape has also produced a need for airbourne surveillance. MoD officials as a result have procured a number of unmanned aerial vehicles (UAVs) to improve surveillance and intelligence for ground operations. Now however it appears that procurement officials became overly reliant on the UOR fund. The gloomy economic outlook has forced the Treasury to tighten spending across the entire government. Despite the intensity of operations in Afghanistan and a possible troop surge of several thousand troops, the Treasury's rule will apply to the MoD as well. "This is a deeply worrying development," Liberal Democrat shadow Defence Secretary Nick Harvey stated. "The MoD relies hugely on UORs to meet the operational needs in Afghanistan." As a result the MoD faces a number of tough choices, none of which are desirable. Either the MoD will have to further delay high profile procurement programmes and continue to make cuts to current programmes in order to account for the Â£365m payback, or UORs for Afghanistan will have to be limited. The latter option could ultimately affect troops on operations and limit their access to new equipment designed to improve capabilities and safe lives. The reactions to the Treasury's new limits on UOR spending were largely negative. "Salami slicing of UOR funding is the very last thing that should be permitted or even contemplated - to do so is to gamble with the lives of our serving men and women," said Commander John Muxworthy, CEO of UKNDA, an organisation that lobbies for higher spending on defence. He labeled the affair as "defence on the cheap," pointing out the while Treasury is in the process of launching a multi-billion pound bank rescue deal that will see tens of billions of pounds of taxpayers money injected into the financial institutions, it is demanding a few hundred million pounds back from the MoD. "Defence, as politicians of all parties often recite, is the first priority of any government. If the will were there they could save our Armed Forces - for they are in need of saving," he added. With a troop surge pending in the coming months, Harvey questioned where additional funds would come from to safeguard them and give them the needed capabilities. "The Government has no choice but to make decisions as where its priorities lie, but the operation must surely come first. Parliament must be allowed to scrutinise any funding choices," Harvey stated, adding "without the resources to meet our obligations, success in already difficult conditions in Afghanistan will be that much harder." With the success of the government's long term policy in Afghanistan tied directly to defeating the Taliban, reduced funding will force troops to either do more with less, or increasingly rely on both the US who is already rumoured to be sceptical of Britain's capabilities and commitment in Afghanistan, or NATO countries who Hutton has gone out of his way to criticise in recent weeks. Either way, the MoD faces more uncomfortable financial decisions in the year.