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Analysis - Trident row highlights Britain's defence budget risk

LONDON (Reuters) - A ministries’ row over who should pay the bill for renewing the Trident nuclear missile system shows in stark relief the struggles faced by a government desperately seeking austerity-era savings.

The treasury and defence ministry are fighting over who pays for the 15-20 billion pound submarine-based system, just as other ministries are scrambling for up to 40 percent in savings for an October spending review.

The Ministry of Defence (MoD), whose budget this year is 36.9 billion pounds, is already facing expected cuts of up to 20 percent by 2015, putting staffing levels and major procurement programmes at risk.

The MoD had thought the treasury would pay for Trident, but last week finance minister George Osborne said the money must come from the MoD’s core budget.

If so, it will heap pressure on the MoD’s already constrained finances, force even deeper cutbacks in equipment and personnel than expected, and raise the heat on simmering tensions between parts of the armed forces that analysts say are briefing against each other to justify their budgets.

Britain’s government is tackling a budget deficit running at 11 percent of gross domestic product.

“If defence didn’t think it was going to pay the 20 billion, then the catastrophic position defence is already in terms of financing has just been made even worse,” said Andrew Dorman, a senior lecturer at King’s College London’s defence department.

CHEAPER ALTERNATIVE

Trident is due for renewal in the early 2020s, and the Conservatives, the senior partner in the coalition government that came to power in May, argue that Trident’s renewal is fundamental for British military strategy.

Coalition partners, the Liberal Democrats, and some analysts say it should be scaled down or a cheaper alternative found.

If the MoD has to pay, most likely involving placing orders with Britain's BAE Systems BAES.L as soon as 2012, it may take a closer look at arguments from Trident's critics.

Britain is far less likely to come under surprise attack given the demise of the Soviet Union, one of the original reasons for Trident, a defence thinktank said last week.

The influential Royal United Services Institute argued that the life of Trident’s existing four submarines should be extended, or that they should only be deployed when necessary, scrapping the continuous-at-sea element of the system.

Other options are reducing the submarine fleet by making other boats capable of carrying nuclear missiles, or scrapping the sub element and launching missiles using another method.

“What is clear is that the inclusion of Trident renewal in the core budget, on current plans, could require the MoD to plan for a further significant real reduction in annual conventional spending by 2020,” RUSI said.

ROLLS-ROYCE VS FORD

The MoD is currently conducting a Trident value-for-money review, part of a sweeping Strategic Defence and Security Review, which is due to report its findings in the autumn.

“This begs the question of whether in fact there is a cheaper alternative that can maintain a credible nuclear deterrent. I don’t think there is,” said Eric Grove of the University of Salford’s war studies department.

Grove argued the MoD could save some money by scrapping its BAE-built Tornado fleet of fighter jets, and on Friday British newspapers reported the move as likely and could save 7.5 billion pounds. The MoD declined to comment.

The Trident review will look at submarine numbers, missiles, the industrial supply chain and system maintenance, but it will not question whether Trident is necessary.

Some analysts argue that Trident is less about defence and more about prestige, particularly as the traditionally hawkish Conservatives are now in government.

“The argument’s always been we have to have a Rolls-Royce system to show who we are, and the idea of having a Ford Focus instead has not been something the Conservative Party has been comfortable accepting,” Dorman said.

Editing by Louise Ireland

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