As the world gets poorer, expect trouble in places that are already poor. Expect unstable regimes, civil unrest and even war as rival ethnic or political groups squabble over a shrinking economic pie.

The Foreign and Commonwealth Office is worried that financial meltdown might affect British economic or political interests. The credit ratings of a swath of emerging economies have been relegated to junk, reducing their ability to finance trade and pay for vital imports, such as food. The Foreign Office fears we might need to step in with emergency loans to shore up fragile democracies, friendly regimes or merely vital trading partners.

What if cash doesn't cure? British troops have just finished fighting a war in Iraq and are still fighting another in Afghanistan. The question is how economic unravelling in a far corner of the globe might end — and that is where Britain's military capability becomes part of the financial reckoning. Countless British governments have relied upon the gunboat to back up diplomacy. Where cajoling or bribery fails, a squadron of Tornado jets parked offshore can be helpful.

Persuasive, if we can afford the jet fuel. For Britain, this economic downturn is exposing an acute internal political weakness. With a government budget deficit of £175 billion and an economy that will shrink by 4 per cent this year, the money to fund Britain's worldwide military ambition simply is not there.

This is not about the cost of replacing Trident, Britain's elderly nuclear deterrent. It is about the aircraft, the boats and the guns that you need if you are to sustain the political fiction that Britain will defend its strategic interests any time, any place, anywhere.

That argument is raging between the Ministry of Defence and the Treasury, which is minded to renege on a £1 billion bill for Eurofighter Typhoon aircraft. It is the final instalment of a three-part contract — the RAF have taken delivery of 144 aircraft and 88 are to come. Work on the first half of Tranche 3 (40 jets for the UK) must begin in the summer or the whole project goes adrift. In a desperate bid to cut costs, 24 aircraft out of the British order are to be assigned to a Saudi Arabian export contract, leaving only 16 aircraft, but the Treasury is still unwilling to release the cash.

Treasury officials suddenly find that they inhabit a different universe from those in the offices of the Ministry of Defence across Whitehall. There, Britain still stands tall alongside America with an Army, Navy and Air Force fully equipped for global policing expeditions on several continents. To that end, the MoD wants new aircraft carriers, destroyers and submarines; a new transport plane and the Joint Strike Fighter, an exotic American aircraft with stealth technology, not to mention Trident. Generals, admirals and air marshals squabble over a procurement budget of about £9 billion per year, which is already unaffordable and cannot hope to accommodate their ambition.

Meanwhile, the military reach of other nations extends as their economies enlarge. China is extending its military and commercial influence into South Asia, helping to build port facilities in Burma, Bangladesh, Sri Lanka and Pakistan. Like Britain, China is worried about securing its future access to oil supplies in the Middle East and minerals in Africa.

Who is the enemy, who are we protecting and what is the price we are prepared to pay? If we are to afford the pensions of the Civil Service, the bill for the ballooning NHS and the rising cost of benefits for the unemployed, the MoD must manage a rapid retreat. The alternative is for the Government to turn its political guns towards home and wage war with the welfare state. It's a battle that Gordon Brown is likely to leave to his successor.

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