THE Ministry of Defence is facing a further £2billion of budget cuts over the next 12 months, The Sunday Telegraph understands.
The new measures will come close to eradicating a £38billion “black hole” in the Mod’s finances blamed by ministers on massive overspending under Labour.
It is also understood that Philip Hammond, the Defence Secretary, will announce next month that the MOD is back within budget after one of the most controversial periods of defence cutting in recent times.
The cuts will form part of “Planning Round 12”, which will outline the department’s spending proposals for the next 12 months.
One option being considered is the cutting of up to 9,000 MOD civil servants on top of the 40 per cent reduction already announced — a move that would reduce the department’s civilian work force from around 80,000 to 45,000 by 2015.
Other options include further cuts to long-term equipment projects such as the Future Rapid Effects System, which at one stage was meant to supply hundreds of air-portable armoured vehicles for the Armed Forces.
But sources have denied that there will be any further reductions to troop numbers, which are already being reduced by 32,000 personnel across the three services.
Mr Hammond said: “We had to take tough decisions to tackle the £38billion black hole left by Labour at the MOD, but we are now close to achieving a sustainable and balanced budget for the first time in decades.
“This will mean we can again start ordering new equipment for the Armed Forces.
“We are still refining individual equipment projects, assessing each case for contingency and risk but I am increasingly confident that the MOD is turning a corner and will soon have a clear and affordable programme. We’ll be spending over £150billion on equipment and equipment support over the next decade.”
There is certainty that even with the Whitehall redundancies, the majority of the £2billion savings will be achieved by a “ruthless approach” to renegotiating existing contracts with the private sector.
As part of the MOD reforms the director general finance will become one of the department’s main power brokers and will now sit on the Defence Board, which makes the key decisions about the future of the Armed Forces. In a radical departure from previous administrations, defence chiefs will no longer be able to spend money “they don’t have”, according to a senior source.
Various options up for cutting were discussed at a Defence Board meeting on Friday but it is unlikely that any new measures will be finalised and announced for several weeks.
The £38billion overspend has been reduced by a 7.5 per cent cut to the Mod’s annual budget designed to save £10billion over four years, together with cuts to some of the military’s manpower and equipment programme.
However, the cuts have left many in the military wondering whether Britain’s fighting capability has been undermined.
A senior defence source said: “Britain has an RAF and Royal Navy that has just lost 72 planes, a Navy with no dedicated air cover and an Army with a morale problem. We are not best placed to deal with another Falklands-like crisis.”