The government will need to tread carefully when it comes to defence cuts

Nearly half of all government departments have agreed to cuts of between eight and ten per cent as the chancellor looks to make savings of £11.5bn across government departments for 2015-16 in his spending review on 26 June.

The Treasury is hitting a wall with the Ministry of Defence, however, where the Chief of the General Staff General Sir Peter Wall has warned that imposing more cuts before the last round of efficiencies kick in “would be very disruptive”. Chief secretary to the Treasury Danny Alexander has countered by saying that in a "department that has more horses than it has tanks, there are room for efficiency savings without affecting our overall military output". David Cameron, meanwhile, has assured there will be no further staffing cuts in any of the forces.

The Armed Forces is already facing rafts of redundancies and spending cuts over the next two years, aiming to reduce manpower from 97,000 to 82,000 by 2015. It will instead rely heavily on a better-trained reservist force. Even with these cuts, Britain still has the fourth largest defence budget in the world.

But cuts to the country’s defence are contentious, and not just for the reason that the stretching of resources and greater reliance on part-time forces may put troops on the ground in more danger. Indeed, the government is working hard to ensure that further efficiency savings made will not endanger the lives of personnel, with a joint review led by cabinet secretary Sir Jeremy Haywood along with the MoD, the Treasury and the Cabinet Office to find savings that could be made "without affecting frontline military capability", set to conclude within the next two weeks.

Commenting in the Telegraph at the end of May earlier this year, respected economist Andrew Lilico made the case that we shouldn’t assume the macroeconomic impact of defence spending is negative. For example spending on research and development is widely acknowledged to have accelerated progress in the development of technologies with both direct and indirect military applications, which perhaps wouldn’t have happened without the immediate value inherent in a defence-orientated project.

Further, a strong defence is necessary for the protection of property rights and trading routes. Taken to its extreme, the most fiscally efficient defence system that could work in modern day Britain would be a policy of massive retaliation, as the US had under former president Dwight Eisenhower. This has, as Ike found out, the downside of making any defensive reaction a potentially huge over-reaction, and escalating issues much faster.

So far, the Home Office, the Department for Rural Affairs, the Department for Culture, Media and Sport, the Scottish Office, the Welsh Office, and Law Offices have all agreed to cuts, while the Treasury remains in discussions with the Ministry of Defence, and the departments for Work and Pensions, Education, Transport, International Development and Health.