Hammond won’t yield before star chamber threat

Philip Hammond has made clear he is far from waving the white flag over more spending cuts, after George Osborne reconstituted the 'star chamber' to bring Whitehall's biggest beasts into line.

The defence secretary said he expected an "adult conversation" would take place after it emerged the Treasury is reforming its committee of Cabinet ministers as a "deterrent" to those still holding out.

Osborne is seeking cuts of £11.5 billion in the 2015/16 spending review, which will be unveiled on June 26th.

With non-departmental expenditure rising more than expected because of the economy's poor performance, and large chunks of Whitehall spending on foreign aid, schools and the NHS ringfenced, the chancellor has little choice but to confront politically sensitive areas like defence and the police to achieve the savings.

"I absolutely understand the challenge the chancellor faces… we need to do more to restore the fiscal balance," Hammond told the Today programme.

"But… if we need to go beyond our efficiency savings we will have to have a discussions across government about how and where we would take our additional capability.

"There is a difference between efficiency savings and output cuts which are very different order and require proper and mature consideration across government about the impact they'll have about our military capabilities."

Hammond insisted he was not a "hold-out", after Osborne yesterday praised seven government departments for settling with the Treasury a full month before the spending review is unveiled in full.

"It is noticeable Osborne was bragging a bit about how well he's done but when you look down the list of departments, four of them are administrative departments," IPPR's chief economist Tony Dolphin told Politics.co.uk.

"The people making all the noise, like Hammond and Cable, are not on that list. It's the big boys who are making all the noise that matter here and they haven't agreed. That's where the tough negotiations come."

The prospect of an appearance before the star chamber – a name deliberately chosen because it is associated with the Tudor court of the same name – proved a sufficient threat during the 2010 spending review.

Now resistance to more cuts is much more deeply engrained and the chances are at least one of the so-called 'national union of ministers' – including Hammond, home secretary Theresa May and environment secretary Owen Paterson – will be prepared to take their struggle to the next level.

"What the prime minister has done is ask the Cabinet secretary to preside over a joint review by MoD, the Treasury and the Cabinet Office looking at what further efficiency savings can be made within the MoD on top of the very aggressive efficiency plan we've already got in place without affecting frontline military capability," he added.

"That process is coming to a conclusion and then I expect to sit down with the chancellor and the chief secretary and have an adult conversation about how we go forward on the basis of that… of what we reasonably can do."

Chief secretary to the Treasury Danny Alexander said all government ministers should look to settle in a meeting with himself and Osborne before facing the broader star chamber.

Their appearance before the chamber – officially known as the policy expenditure committee – would see them pitted against the ministers who have already settled, plus minister without portfolio Ken Clarke and government policy minister Oliver Letwin.