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The Liam Fox letter row: David Cameron can either shelter Departmental budgets or reduce the deficit. He can't do both.

By Paul Goodman

Screen shot 2010-09-29 at 08.31.47 The Liam Fox/David Cameron defence letter story will doubtless run all day.  Yesterday evening, Fox released a statement saying that it's "entirely normal" for Ministers to make representations to the Prime Minister during a spending review, and that he is "extremely angry" about the leak of his note to the Daily Telegraph.

Tim wrote about the story as it broke last night.  Here is my take this morning as it continues.

  • If George Osborne began now to pick apart bits of his spending framework (such as the NHS pledge) to placate some spending Ministers, the whole structure would come under further pressure from others.  This would spur a crisis of confidence, which is why it isn't going to happen.
  • I'm not a fan of the new Star Chamber system set up to adjudicate spending disputes - see here and here.  But a full Cabinet discussion of the spending review would open the door to it being picked apart - which, again, is why it won't (and shouldn't) happen.
  • As Alex Massie points out on Coffee House, Fox told the Conservative Conference last year that "he could - and would cut the MoD budget by a quarter without this having any impact on 'front-line services' ".
  • George Osborne said in his budget speech that he recognises the "particular pressures" on defence and education - suggesting that while their budgets won't be insulated, they won't be cut by anything like 25%.  The Telegraph says that Defence has been asked for 10%.
  • There have been a stream of media stories about the spending review and the defence review during the last few weeks.  Consider, for example, this one recently from "The Times" (£), which reported that the Defence Secretary had reassured Washington over defence spending.
  • Fox's letter must be seen in the context of yesterday's National Security Council meeting.  It was sent in advance of what was clearly expected to be a tense discussion.  According to The Guardian, David Cameron pressed claims at the meeting about the cost of scrapping two aircraft carrier contracts.
  • There's little point in speculating about how Fox's letter reached the Telegraph.  What's certain is that, as Tim pointed out yesterday, there are serious tensions between the Defence Secretary and the Treasury, and that, as I pointed out during the summer, between him and Downing Street.
  • Sure, Defence must be protected from cuts of over a quarter. Osborne must keep his word.  But it's also reasonable for Osborne to ask Fox for reductions, given the Defence procurement bureaucracy, Fox's previous commitments, and the scale of the deficit.  The Defence Secretary should stump up.
  • There's bound to be further today about speculation about ultimatums and resignations.  The Defence Secretary's letter noted that his views are shared by "Ministerial colleagues".  But don't expect any shocks until after next week.  Dr Fox will want to make his pitch to Party Conference.
  • Governing Britain means making tough choices.  David Cameron can either shelter departmental spending or cut the deficit.  He can't do both.
  • The Government's heading for dangerous waters.  Conservative backbenchers are sure to give the Defence Secretary's concerns a very sympathetic hearing when Parliament returns.  And next week's Conservative Conference could be blown off course by spending rows.


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