Defence: Military explains how it will save £700m

Around £4bn from next year's Treasury reserves will be used to fund operations in Afghanistan, almost all of it spent on equipment, with an emphasis on armoured vehicles to counter the bombs that have claimed 93 per cent of lives lost in the conflict.

In his pre-Budget report in November the Chancellor announced that £11bn in savings were needed across government departments, and the Ministry of Defence (MoD) would have to identify £700m of "efficiency" savings.

Yesterday, in response to the Budget statement, the MoD gave details of how it proposes to meet that £700m target. A projected £500m will be saved, it said, in "greater use of collaborative procurement on construction, food and IT as well as better management of defence estates". Another £130m will come from further saving through replacing "legacy IT systems" which are inefficient and £30m from cutting back on outside consultants.

The MoD has also commissioned an independent review of the number of civil servants it employs, which is due in two months' time. "Savings may be significant," claims the Department in a statement.

However a recent report by the Public Accounts Committee found that the MoD faces a black hole of more than £36bn in its budget due to systemic failures and the inability to take into account the effects of impending spending cuts. The report criticised the Treasury as "remiss" for not keeping a proper oversight on MoD spending.

The Strategic Defence Review (SDR) scheduled to start after the election is expected to lead to a number of "prestige projects" being cut, including the Royal Navy's projected two new aircraft carriers. Some of the new generation of RAF jets and some of the Army's squadrons of tanks are seen as vulnerable. Defence officials argue that unlike other government departments they have to carry out cuts against a backdrop of the war in Afghanistan. Last December Bob Ainsworth, the Defence Secretary, announced a "reprioritisation" of the MoD budget for Afghan operations, including money for Chinook helicopters.

The Treasury, however, points out that hundreds of millions of pounds of the Afghan expenditure has come in the form of Urgent Operational Requirements (UORs) which do not affect the MoD budget in the immediate term.