RAF sets up conflict with Cameron as ministers agree defence cuts

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David Cameron will unveil Britain's new defence strategy for the next decade on Tuesday after cabinet ministers reached an outline agreement on it yesterday.

Government sources denied that the Prime Minister had hijacked the announcement to sideline Liam Fox, the Defence Secretary, who is fighting demands for huge cuts in his £40bn-a-year budget. But the decision surprised some MPs, who had expected Dr Fox to present the new strategy.

Downing Street was irritated by the leak of a letter from Dr Fox to Mr Cameron last month, in which the Defence Secretary warned that the proposed 10 per cent cut would have "grave consequences". The Prime Minister dismissed his fears as "unfounded".

Insiders said the first review of Britain's security needs since 1988 reached much wider than the Ministry of Defence (MoD), pointing out that it also covered the work of the Home Office, Foreign Office and Department for International Development.

Although Dr Fox is still locked in his budget battle with the Treasury, broad agreement on the overall strategy was reached at an hour-long meeting of the National Security Council yesterday, chaired by Mr Cameron. It will be the group's final session before the review is published.

Meanwhile the RAF chief Sir Stephen Dalton has warned Mr Cameron of the dangers of deep cuts to the air force, which is expected to bear the brunt of forthcoming cuts. In a private speech to MPs on Monday he warned that the UK "would not be able to guarantee security of its sovereign air space and we would be unable to respond effectively to a 9/11-style terrorist attack." Sir Stephen argued that the air force was at least as important to the Afghan campaign, describing it as "unquestionably the glue that holds the campaign together".

Ministers agreed to present the long-awaited Strategic Defence and Security Strategy in two stages. On Monday, the Government will publish a paper explaining why Britain's security must be remodelled to meet the new threats of the post-Cold War era. On Tuesday, the budgets will be announced by Mr Cameron in a Commons statement.

Sir Peter Ricketts, the Prime Minister's national security adviser, and armed service chiefs will explain the shake-up in media interviews. The two-stage plan is designed to outline the context so the shake-up is not seen merely as a "cuts exercise". The move will be seen as a sign that the MoD's headline figures will reveal big cuts.

Yesterday Mr Cameron warned the Cabinet's weekly meeting that there was a "tough road" ahead as George Osborne, the Chancellor, prepared to unveil £83bn of cuts in his spending review a week today. The cuts will average 25 per cent for Whitehall departments over the next four years.

Mr Cameron urged his cabinet colleagues to "pull together" as the Treasury's hard bargaining with ministers reached its climax.