When George Osborne, Britain's new chancellor of the exchequer, recentlyannounced that the Ministry of Defense (MoD) must now pay for the modernization of the Trident submarine-based nuclear deterrent out of its own day-to-day budget, it marked a stark change from previous policy, by which the Treasury has traditionally footed the bill for nuclear weapons development. Though the plans are not new, the announcement caused a public row between Defense Secretary Liam Fox and Osborne. Fox has warned that with the MoD's budget already in tatters, it will be impossible to maintain the MoD's other capabilities if it has to meet the full cost of the Trident replacement program alone. Given the possible ramifications for the defense industry, leading manufacturers have even written to Prime Minister David Cameron about the proposal, noting it has proven "unsettling for investors." The accounting decision means that plans to modernize Trident on a like-for-like basis are likely to come under increased scrutiny.
Because of Britain's current budget deficit of11 percent, government departments across the board have been ordered to make substantial savings. In July, Fox called MoD's then-current obligations to shave20 percent-- or £7 billion -- off its budget by 2015 "the absolute mother of horrors of a spending review."This wasallegedlybefore he received news that the MoD would also be responsible for absorbing the cost of Trident modernization -- whose estimates range from £20 billionto £76 billion.
The Public Accounts Committee had already warned inMarchthat the MoD's funding shortfall could rise to more than £36 billion in the coming decade. With Trident, this will increase even more substantially.