Defence cash plan 'a panic measure'

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The Treasury has agreed to allow the Ministry of Defence more flexibility in its budget to meet immediate priorities - including two new aircraft carriers and equipment for frontline troops.

But it is on condition the MoD carries out a major review of other projects, leading to fears of increasing uncertainty in the defence industry.

Shadow defence secretary Dr Liam Fox, said: "This announcement is not driven by any rational examination of military equipment needs but by the gaping hole in the Treasury left by Gordon Brown's economic mismanagement.

"Long term planning has been abandoned in a panic attempt to plug the gaping hole in the defence budget. This effectively signals the end of the Defence Industrial Strategy and will add further uncertainty to the defence industry at a time when unemployment is already rising."

A Ministry of Defence spokeswoman said: "We are determined to do more to support our people here and on the frontline. To do that, we need to better prioritise our spending plans. The examination of the equipment programme will focus on two issues above all: bearing down on cost increases to equipment programmes and rebalancing the equipment programme to better support the frontline.

"The examination will be focused on identifying potential savings to the equipment programme in order to better support the frontline and our people at home.

"If the examination identifies savings, the Treasury has agreed to flexibility within the existing settlement to make those changes that will enable us to rebalance our plans. This will not be new money - merely flexibility within the settlement to make the necessary medium-term changes we need to make."

She added: "Our commitment to the Carrier has been made clear and is unchanged."

Sources close to Defence Secretary Des Browne said: "These measures are about long-term planning. The Tories need to stop posturing and say exactly what they would do differently, and whether or not they would match the Government's spend on defence."