01 Apr 04. The Daily Telegraph reported today news of a proposed range of savage defence cuts across all three armed forces.

The Royal Navy is to lose two aircraft carriers after Geoff Hoon, the Defence Secretary, lost his argument with the Treasury, defence sources said last night. The ships will be “withdrawn from operational service” amid attempts to cut the defence budget. They will be moored at Portsmouth before being sold, the sources said.

“We will stand them down, which means they’ll be held in operational reserve,” one said. “They are not going to be scrapped, they can be up to full readiness within 50 days. In the long-term they will be sold but in the short-term they could still be needed.”

The two vessels to be withdrawn are Illustrious and Invincible. Ark Royal, the newest of the carriers, is to undergo routine maintenance. It will be kept on, contrary to reports that it is to be permanently mothballed.

The carriers are just the first of a series of cuts, the sources said. A number of other pieces of equipment will go as the MoD seeks to save up to £1 billion to address cash problems caused by a new accounting system and the Iraq war. Despite assurances from the Treasury that the war will be funded in full, the MoD had to borrow £500 million from budget funds due to be paid out on the Eurofighter programme to cover short-term costs. The money was borrowed in the belief that the Eurofighter programme would be delayed but there were no delays and the MoD now needs to find the money. The MoD dismissed any suggestion that two carriers were to be removed from service. But the sources said there was an urgent need to cut some existing equipment to save new programmes.Mr Hoon told the Commons Defence Committee yesterday that “difficult choices have to be made between existing equipment and equipment we will need in the future.”

He also refused to rule out any cuts in the number of infantry regiments, amid widespread rumours that Scottish regiments, including the Black Watch are to be scrapped. There would “inevitably have to be adjustments in numbers” and to give “an absolute blanket assurance would not make sense”, he said. It also emerged during the hearing that the new £200 million Defence Medical Centre in Birmingham is to be scrapped.

Sir Kevin Tebbit, the head of the MoD, told the MPs that this was “the result of a reprioritisation of defence medical services” and not a result of the need to make cash savings. Discussions with the Treasury on the MoD’s budget shortfall were continuing, he said. However, defence sources said that there was no sign of any new money rather than a continued commitment to extra funding announced two years ago and already taken into account.

Defence chiefs are furious over a package of cuts proposed by MoD teams set up to find ways of solving a £1.2 billion budget shortfall that threatens to force cutbacks in operations abroad. The MoD teams, known as “work strands”, are not due to report until next month, but defence chiefs are certain to try to block some of the more controversial moves.

Air Chief Marshal Sir Jock Stirrup, Chief of Air Staff, in particular is likely to argue strongly against the loss of the GR7 Harriers. The aircraft are due to be upgraded and scrapping them would also mean a loss of experience in short take-off and landing that would hamper the introduction of the Joint Strike Fighters (JSF) that are due to replace them.

Admiral Sir Alan West, First Sea Lord, is bound to try to fight the loss of two aircraft carriers since doing without them until the introduction of the Royal Navy’s two new large carriers will raise questions over why these are needed at all. One of the civil servants working on the plans defended the decision to axe the carriers, saying that they would not be needed if there were no Harrier aircraft to fly off them. “The J