U.K. Treasury Said to Support Multi-Year Defense Spending Plan

(Bloomberg) -- The U.K. Treasury has relented to Ministry of Defence demands for a multi-year spending plan this month, but differences remain over the amount, a person familiar with the matter said.

While defense officials want a four-year deal in the “low-20 billion” pounds, Chancellor of the Exchequer Rishi Sunak is not offering that much, according to the person, who requested anonymity discussing internal negotiations.

At stake if the department doesn’t get what it’s seeking is the ability to buy equipment and modernize the armed forces, the person said. Soldier numbers would have to be cut, bases closed and a new fighter jet abandoned, they said, confirming a Times newspaper report which said a settlement of 15 billion pounds ($20 billion) had been offered.

A Treasury spokesman declined to comment on “speculation.”

The row highlights the pressure Sunak is under to deliver on expensive manifesto commitments while also spending billions of pounds on grants and furlough payments to help the U.K. economy weather the downturn caused by the coronavirus pandemic.

Election Promises

Sunak last month abandoned plans for a spending review covering three years in favor of a one-year stopgap because of the uncertainty caused by the virus. At the same time, the Treasury said multi-year plans for the National Health Service and schools will still be funded, as would priority infrastructure projects such as the HS2 high-speed rail line.

But the absence of a multi-year deal for the Ministry of Defence in the Treasury’s announcement led to concern it would be unable to plan strategically for future needs.

Prime Minister Boris Johnson’s Conservatives pledged to increase defense spending by at least 0.5 % above inflation every year of the current five-year Parliament. Promises included modernizing equipment, improving intelligence capability, building new frigates and maintaining the U.K.’s Trident nuclear deterrent.

The outcome of the spending review is due to be published on Nov. 25, when the Treasury will set out departmental budgets for the 2021-22 fiscal year, alongside some longer term commitments.

Sunak started the spending review in July with a warning that ministers faced “tough choices” in the wake of the pandemic. Departments were told to “identify opportunities to re-prioritize and deliver savings,” dialing back on the inflation-busting increases previously envisaged.

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