The Report
of the Iraq Inquiry
expenditure
on new equipment and logistic support for the Armed Forces, “with
obvious
consequences
for operational capability in future years”. Retaining the cash
controls in
future
years would cause huge damage to military capability, the loss of
jobs in industry
and damage
to the Government’s credibility.
456.
Sir Kevin
Tebbit provided advice to Mr Hoon on 5 March on the specific
reductions
in
programmes and capability in 2004/05 and 2005/06 that would be
required by the
Treasury’s
cash controls.268
457.
Mr Hoon
wrote to Mr Blair on 8 March, highlighting some of those
reductions
and stating
that he could accept authority to transfer £500m (rather than
£750m) from
non‑cash to
cash each year.269
458.
Mr Hoon
submitted the MOD’s bid for funding to the 2004 Spending Review
on
26 April.
459.
On 6 July, as
negotiations on the outcome of the 2004 Spending Review
reached
a
conclusion, and with the MOD’s bid under pressure, Sir Michael
Walker, Chief of the
Defence
Staff, wrote to Mr Brown:
“Were the
[MOD’s] bid not to be met … I would be unable to present the
outcome to
the Armed
Forces as being consistent with policy and other than the
consequence
of inadequate
funding.”270
460.
Mr Hoon
echoed that warning in a letter to Mr Blair on 9
July:
“… a
settlement around this level is essential for the Chiefs of Staff
to support it.
I could
not rule out the Chiefs speaking out in public, not least because I
would
not expect
them to be able to explain a poor settlement in positive terms to
their
461.
On 11 July, in
an accompanying letter to the MOD’s 2004 Spending
Review
settlement,
the Treasury agreed that the MOD could transfer £350m from non‑cash
to
cash in
both 2004/05 and 2005/06.272
A new
regime would be established from 2006/07,
under which
transfers would be at least in part conditional on efficiency
improvements.
462.
In June 2004,
in response to a request from Sir Kevin Tebbit for an
explanation of
how the
MOD’s cash requirement had grown from £490m to £870m to
£1,152m during
the course
of September 2003, Mr Lester sent him a chronology of the
dispute
268
Minute
Tebbit to Hoon, 5 March 2004, ‘STP/EP 04: Years 1 and
2’.
269
Letter Hoon
to Blair, 8 March 2004, ‘Defence Budget’.
270
Letter
Walker to Brown, 6 July 2004, ‘Defence Budget’.
271
Letter Hoon
to Blair, 9 July 2004, ‘SR 04: Defence Budget’.
272
Letter
Boateng to Hoon, 11 July 2004, ‘Ministry of Defence: 2004‑05 and
2005‑06 Budgets’.
518