Trident cost would hit defence resources - minister

Defence Secretary Liam Fox waits to answer a question as an aide points after his speech at the Royal United Services Institute (RUSI) in London June 14, 2010.

LONDON (Reuters) - A Treasury proposal to have the cost of replacing Britain's submarine-based nuclear arms system absorbed into the core defence budget would squeeze existing defence funding, Defence Minister Liam Fox said on Sunday.

Under the previous Labour government it was agreed the Treasury would meet the cost of capital expenditure for Trident -- expected to be as much as 20 billion pounds -- as it was of strategic significance. But this is now under scrutiny as part of the spending review of Prime Minister David Cameron's conservative-liberal coalition government.

The core defence budget, 36.9 million pounds for the current financial year, pays for daily running costs such as military staff salaries and upkeep of equipment.

"There has always been an understanding (that) the budget for the nuclear deterrent came from outside the core defence budget. Running costs for the deterrent have always come from inside the defence budget, although the capital costs were outside," Fox said in an interview with the BBC.

"To take the capital cost (into the department's core budget) would make it very difficult to maintain what we are currently doing in terms of capability so there is an ongoing debate with the Treasury."

Fox reiterated the government's view on the need to replace Trident and said he was confident this cost could be reduced.

"We really can't play fast and loose with the country's defence. We don't know what the threats will be between now and 2050 ... So we have to ensure that we have the precautions to protect Britain from nuclear blackmail by any other state."

Regarding an Independent on Sunday report that Afghan President Hamid Karzai would next week announce a withdrawal of British troops from Afghanistan by 2014, Fox said Cameron had already made clear he did not want to have British combat troops "in substantial numbers" there by 2015.

"He has made that explicitly clear. That does not say we will not have troops there in a role assisting with the training of the Afghan army," said Fox.

(Reporting by Kylie MacLellan; Editing by Mark Heinrich)