Fox issues warning over cuts to Trident

Liam Fox confirmed he was in discussions with the Treasury over suggestions the full cost of renewing the Trident system could be absorbed by the Ministry of Defence budget.

And in what will seen as a warning shot to Chancellor George Osborne, he said such a move would make "very difficult to maintain what we are currently doing in terms of capabilities".

Existing arrangements mean that while the MoD is responsible for the running costs of Trident, the capital costs of the submarine-based deterrent are paid from central funds.

And with the Ministry of Defence already facing cuts of 10 per cent as part of the Government's austerity measures, the additional burden would place enormous extra pressure on resources.

Asked about reports he had threatened to quit if Trident was not replaced, Dr Fox said: "We really can't play fast and loose with the country's defence.

"We don't know what the threats will be between now and 2050 – no one could have predicted 40 years ago what the world would look like today.

"So we have to ensure we have the precautions to protect Britain from nuclear blackmail by any other state.

"There has always been an understanding that the budget for the nuclear deterrent came from outside the core defence budget.

"Running costs for the deterrent have always come from inside.

"That is something we are discussing in the run-up to the spending review.

"To take the capital cost would make it very difficult to maintain what we are currently doing in terms of capabilities."

Asked if the consequences for Trident and other defence spending would be "grave", he said: "I think you can leave that to me and the Chancellor to have a discussion about."

He said he was "pretty confident" a review of the costs of the Trident replacement could identify significant savings.

And he said he hoped to make those findings public as soon as possible.