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Exclusive: Armed forces budget faces 'huge' £3bn pension black hole

The i logo The i 11/02/2019 Richard Vaughan
a man in a military uniform © Provided by Johnston Publishing Ltd

The armed forces budget faces being slashed by billions due to a 'huge' funding black hole as a result of Treasury-enforced increases to pension contributions, figures handed to i reveal.

Frontline defence spending will be hit by nearly £3bn in the next five years following the Chancellor's decision to dramatically raise state pension costs.

It comes after the Government's spending watchdog the National Audit Office warned the Ministry of Defence was overseeing a shortfall of around £7bn in its 10 year plan to adequately equip its personnel.

a man standing in front of a store: Defence Secretary Gavin Williamson © Provided by Johnston Publishing Ltd Defence Secretary Gavin Williamson

Paper tiger

The hidden cuts will also severely hinder Defence Secretary Gavin Williamson's ambitions to increase the 'mass and lethality' of Britain's armed forces to meet the threats of the 21st Century.

Mr Williamson is due to tell RUSI today that Britain should play a greater role in global crises once it leaves the European Union to cement its place as an 'international power' on the world stage.

'To talk but fail to act risks our nation being seen as little more than a paper tiger,' Mr Williamson will warn.

a man and a dog on a dirt road © Provided by Johnston Publishing Ltd

But such plans are in danger of being thwarted as the armed forces face an immediate £1.7bn shortfall by the end of this parliament due to pension liabilities, with costs increasing by nearly a billion pounds a year after 2022.

Commons Library analysis of official figures estimates the pensions burden on the armed forces will rise to £880m in 2021-22 and hit £970m by 2023-24.

Hidden costs

The huge shortfall is a result of the government allocating several billion pounds a year too little to cover public sector pension contributions for employers such as the armed forces.

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Library experts concluded that 'the largest changes to the forecast come from government decisions'.

Labour said the costs will all but wipe out the £1.8bn in additional defence spending Philip Hammond announced in the Autumn Budget over two years.

Stephanie Peacock, Labour MP for Barnsley East, who secured the details of the pensions increases, said the Government must rethink its plans.

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'The Prime Minister tried to tell us that austerity was over, and the Chancellor tried to tell us that he was investing in defence. But once again, the reality just doesn't match the rhetoric,' Ms Peacock said.

'Our armed services are facing a stealth cuts bombshell that eviscerates the so-called extra funding, and there is no sign that the government will step up, step in, and sort out its own mess.'

Unforeseen costs

So far only the NHS has been given assurances its pension costs will be covered in the long term. It follows a decision in the autumn by the National Police Chiefs Council to threaten the Government with legal action over the unfunded pension increases.

Police forces were handed a £420m pensions bill prompted police chiefs to apply for a judicial review to try and force the Treasury into a climbdown.

A spokesman for the MoD said: 'HM Treasury will be supporting departments with any unforeseen costs for financial year 2019-20. Funding additional costs beyond this point will be considered in the Spending Review.'

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