THE government is planning big cuts in an attempt to plug a £2 billion black hole in the defence budget.

All three services will be affected, with at least one major programme axed and reductions in vital ships and ground attack aircraft.

The dire state of the defence budget was the key reason behind last week’s sudden resignation of Lord Drayson, minister for defence equipment and support, according to well placed sources.

They said he quit after a series of rows with Des Browne, the defence secretary, and would leave to race cars in the United States with the aim of competing in the Le Mans 24-hour race yesterday, however, speaking at the Brands Hatch racing circuit in Kent, where he was in training, Drayson stuck to the official line that the opportunity to race in the US Le Mans series was too good to miss.

“There is nothing extra behind this. I have a real passion for motor racing and I have a fantastic opportunity at this stage in my life. I’ve got to grab it with both hands,” he said.

Sources say the former businessman, who had staked his reputation on a radical reorganisation of defence procurement, was not prepared to see his plans watered down.

He was furious when the Defence Export Services Organisation was scrapped behind his back earlier this year.

Although he stayed on, his plans were rejected three times by Browne, eventually forcing him to quit.

“Drayson was insisting there were no programmes that could sensibly be cut, while Browne was refusing to ask for more money,” one source said.

Serious cuts are now inevitable next year. The navy is set to lose five frigates and the RAF two bases and a quarter of its frontline ground attack aircraft. “That won’t be anywhere near enough to cure the problem. Even axing a major procurement programme would not be enough,” the source said.

“The budget is in dire straits and it’s difficult to see what they can do to put it right.”

The key issue for Drayson has been the defence industrial strategy (DIS), his widely admired attempt to streamline procurement and stabilise the budget.

He published the first part two years ago and the second instalment was due to be published next month. For weeks, however, industry and Ministry of Defence (MoD) sources have been suggesting there was not enough money to implement it as Drayson wanted.

He insisted yesterday that the DIS was on course. “I’m sure that will continue. That’s not something that is down to one person,” he said.

The MoD said that it hoped to publish the second chapter of DIS next month, but was not certain that it would happen before the new year.

Payments due next year include £1.7 billion for the new Trident nuclear deterrent; £1.2 billion for continuing payments for Typhoon and £1.2 billion for navy aircraft carriers, destroyers and submarines.

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