Graphic: where the money is going

The Armed Forces yesterday became the first significant victims of government attempts to reduce spending in the face of the advancing recession.

Two programmes worth £20 billion will be cut and delayed after defence chiefs were told that there was not enough money to go ahead as planned.

The announcement throws into disarray the Army’s £16 billion update to armoured vehicles, while the Royal Navy’s £3.9 billion project for two new 65,000-tonne aircraft carriers is postponed for two years.

The statement from John Hutton, the Defence Secretary, sparked anger and accusations that the cuts went against the Prime Minister’s promise to help Britain to spend its way out of the downturn.

Liam Fox, the Shadow Defence Secretary, called on ministers to spend more time defending Britain. “Only a few weeks ago Gordon Brown and Alistair Darling said that they would bring forward capital projects to boost the economy. Now they are announcing cuts and delays to major programmes,” he said.

The UK National Defence Association, which is supported by three former chiefs of the defence staff, voiced its concern. Commander John Muxworthy, its chief executive officer, said: “The Government is pouring hundreds of billions of pounds into a possibly vain endeavour to solve the financial and banking crisis but at the same time cutting back on the nation’s defence and security. This is folly.”

Defence sources said that Admiral Sir Jonathon Band, the First Sea Lord, had argued robustly to stick to the existing aircraft carrier programme under which the first ship, HMS Queen Elizabeth, would have come into service in 2014, and the second, HMS Prince of Wales, in 2016.

He and the other Service chiefs had expressed “disappointment” at the proposals but they had reached a collective decision to give their approval when faced with the financial imperative of saving money and ensuring the highest priority be given to operations in Afghanistan and Iraq.

The two carriers — first announced in 1998 as the centrepiece of the Government’s new expeditionary strategy — were supposed to have entered service in 2012 and 2014 but were then delayed two years. Mr Hutton’s announcement means that HMS Queen Elizabeth will now not be ready for action until at least 2015.

It is a serious blow for the Royal Navy, which has had to bear the brunt of the cost-saving exercise forced on Mr Hutton to balance the books and resolve a £2 billion hole in the defence budget. New fuel tankers for the Royal Fleet Auxiliary, vital support vessels for the Navy, have also been delayed.

General Sir Richard Dannatt, Chief of the General Staff, had recently been reassured that the Army’s Future Rapid Effect System (Fres), a new generation of 3,000 armoured vehicles to replace ageing models such as the Saxon troop-carrier and Scimitar reconnaissance vehicle, was high on the list of MoD priorities. The original in-service date for these new vehicles of 2009 is now seen as pie in the sky.

With an overall price tag of £16 billion, however, Mr Hutton has had to cut a swath through the Army’s programme. A new utility vehicle to replace the Saxon was supposed to be based on the Piranha V design. In May, before the credit crunch began to bite hard, the MoD announced that it had provisionally accepted this design. Mr Hutton said yesterday that he was withdrawing approval for the vehicle and gave no date for when a new round of bids could be made. He acknowledged that it would mean a delay in the programme.

He is pressing ahead, however, with a Fres version of the Scimitar and Spartan vehicles, as well as a programme to upgrade the existing Warrior armoured infantry fighting vehicle.

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