How might the MoD get round its spending settlement?

The Ministry of Defence is Whitehall’s last monolith. Charged with the nation’s defence, it is powerful enough to challenge the Treasury. As Pete notes, there are signs that it’s trying to defer (if not avoid) the cuts laid out the punishing strategic defence and security review.

It has many ways of doing this. Obviously it can use political pressure because troops are deployed in Afghanistan and Libya. But there’s also a neat accounting step that allows the MoD can transfer costs directly to the Treasury. You may recall that the Budget contained a £700m increase for ‘single use military expenditure’ (SUME) in 2011-2012. SUME does not appear as capital spending in the national accounts because it can only be used for military purposes. Funds are taken from the Special Reserve to cover the costs of in-theatre conflict, which eat into the MoD’s already tight operating budget – remember that in addition to a 8 percent funding squeeze the MoD is also contending with the £38bn black hole in its accounts.

Treasury officials have informed Coffee House that the planned increase will go towards operations in Afghanistan, ‘consistent with past practice’. Perhaps there will be similar SUME rises in the Budgets to come.