MoD 'Out Of Debt' For The First Time Ever

Defence Secretary Philip Hammond is expected to announce that the Ministry of Defence is out of debt for the first time in its history.

Officials have spent months trying to balance the spread sheets and fill a black hole of £38bn.

Implementing the Strategic Defence and Security Review (SDSR) of 2010, Mr Hammond has overseen a series of huge cuts to the Armed Forces including compulsory redundancies.

By 2015, the Royal Navy and the RAF will have lost 5,000 jobs each. the Army will have 7,000 fewer soldiers and the Ministry of Defence will have shed 25,000 jobs.

That, coupled with equipment cuts including the early retirement of HMS Ark Royal and selling the entire Harrier Jump Jet fleet to the Americans has, according to Mr Hammond, finally balanced the books.

Speaking to the Sunday Times ahead of the announcement in the House of Commons, Mr Hammond said: "For the first time in the defence budget, we've got a reserve in each year, which means if something comes up, we'll be able to manage it, drawing on our own reserve rather than having to cancel or postpone equipment."

The details of what Mr Hammond describes as a "grand announcement" have not yet been revealed. However, MoD sources have told Sky News that a new way of managing the equipment programme - the most costly part of the overall defence budget - has been developed.

Under the old system, spending for all equipment projects was budgeted out of one pot. That meant that core funds could be wasted on projects which were started but then later cancelled because they were no longer required.

Under the new spending system, a core programme has been created for equipment projects which are certain to go ahead.

A separate contingency fund has been created which will mean that future projects which form part of the core programme will not be delayed or cancelled because of a shortage of cash.

The core programme has a fully funded budget of £152bn over 10 years. The overall defence budget over the same 10-year period is £160bn, giving the department £8bn for their contingency pot.

Mr Hammond said the U-turn on the type of plane to be bought for the Royal Navy's new aircraft carrier, which will result in a substantial saving, was "the last piece of the jigsaw".

"In terms of reducing the size of the civil service, the army and the air force, we shouldn't have to do any more over and above what we've already announced," Mr Hammond told the Sunday Times.

There is still another tranche of redundancies to be implemented, though they have already been announced. As part of that, there is a fear that some famous regiments could be scrapped or amalgamated with others.

Mr Hammond said that rumours are far from the reality.

"We hugely value the regimental system, and nobody, as far as I know, is suggesting dismantling it." he told The Sunday Times.

An MoD source would not be drawn on when any announcements over the future of some regiments, particularly Scottish ones, would be made.

Labour's shadow Defence Secretary, Jim Murphy, said: "A government which appears triumphant at cutting widows' pensions, sacking soldiers by email, and losing our military capabilities knows the cost of everything and the value of nothing."