A Boy Scout motto: prepared for what?

In 1939 the gallant Polish cavalry charged at the German Panzers: a last hurrah against the cold steel of modern technology. Yet in the late Thirties the Polish government had held a defence review. Politicians had wanted to trade in the horse soldiers for tanks but the Polish defence establishment, dominated by the military aristocracy, refused. Too many horse-breeder jobs would be lost. So instead of tanks, they created a fourth cavalry division.

Now the new Labour Government is holding its defence review. What chance that cold-eyed reason can win out against the entrenched interests of our own defence establishment? At least there will be a public debate. On Friday the Ministry of Defence and the Foreign Office held the second part of a remarkable exercise in open government, a public seminar with two secretaries of state, top civil servants, all the Armed Forces top brass, and on the record, too - a breath of New Labour blowing through the dark corridors of power. (Pity virtually no one else came.)

Here was the defence establishment nakedly making its pitch for Britain continuing to "punch above our weight" - seeking to justify the disproportionate cost of defence to our medium-sized economy. On display were all the vested interests the Government will have to face down if this review is to hone our defence budget to match our true status. At pounds 22bn, twice the European average, the Defence budget is twice what we can afford.

This review is led by the Foreign and Commonwealth Office, and the Treasury is rightly despairing of their suggesting cuts. "History has given us a big part to play," announced the FCO Deputy Under Secretary, pitching for more money and more ambassadors. But history is our problem - imperial dreams whispering to them from the magnificence of the FCO's Durbar Court. How they scorned "the Swedish or Canadian option", an FCO nightmare whereby Britain finally accepts that it is just a smallish country. "Would we be any good at it, given the way we have been for the last 200 years?" he asked rhetorically. That's their problem, lost in 200-year-old fantasies. Who are we now? That is the question. Instead both the FCO and the MoD talk about what we are good at. We are so good at diplomacy and so good at fighting - just as the Poles were so good at cavalry. The FCO wants to go on being good all around the world, with our - or rather, their - feet under every top table. How do we ensure that? By having mega-forces to "underpin" our mega-diplomacy: "Talk quietly but keep a big stick."

The big stick, represented by the MoD Deputy Under Secretary, has simple objectives: it just wants all the men and machines it can get. So they listed all the dangers we face, clear and present, distant and very remote indeed, but all needing every sort of flexible (and expensive) response. After Ireland, there is the old Russian bear, "still quite dangerous", and although war is a "remote contingency" we must Be Prepared. The Boy Scout motto became increasingly costly as the day wore on. Risks to the right of us, risks to the left of us, the Mediterranean, the Gulf, the Middle East ... Lifting our 200 citizens (plus 1,600 of other people's) from Zaire had cost a lot, and think of Bosnia! And don't forget the Armed Forces' "ceremonial function". A brigadier said we might be needed in Latin America. Good grief! Not a cut in sight.

The chaps at the FCO and MoD know how to run rings around politicians - and there it was threatening to happen again. The Chief of Defence Staff only spoke once, unable to contain himself when a slightly radical academic went too far - "We've got 57 per cent less [sic] tanks!" he exploded. He wasn't having any of these "quick-fix, clever ideas." It was British hardware that "put the fear of God up the Serbs". Proud references were made to the fine British snatch of Serb war criminals - "but that pride has to be paid for".

Where is the rest of the peace dividend from the Cold War? Ah well, an easily identifiable single enemy has turned into a host of remote but equally expensive threats. With a fausse naivete the MoD says to the politicians: "You tell us what British objectives are, and we'll deliver." What they really mean is: "Give us a role and we'll re-label whatever we've got to fit it." You should have seen the glee with which they swooped on Robin Cook's promise of a new, ethical foreign policy. Ah, ethics! You want ethics, we'll give you ethics - but it'll cost. "The ethical dimension brings new responsibilities with it," said the MoD man, needing a "wider maintenance of peace". We may have lost an empire, but we've found a new use for our defence budget, as international policemen - Swedes with guns.

Can we hope that closer European co-operation will mean savings, each country offering a defined, dovetailed contribution? Oh no; that could cost more. We might be drawn into new conflicts not directly in our own interest but those of our allies - joining France in Algeria, maybe.

Now, we do not know what Robin Cook's or George Robertson's true intentions are in this defence review. We can only hope that old tusker John (now Lord) Gilbert, defence minister extraordinary and recent consultant to US arms manufacturers, did not speak for them when he said we should spend more on defence. But for all his easy, affable charm George Robertson gave nothing away, beyond an ambiguous "We must justify every penny spent". Well, that is exactly what the MoD is good at.

So many options are closed already, before this review reports. On the very day of the seminar the German cabinet finally agreed their share of the Eurofighter (half as many as we are buying), which will cost us pounds 15bn. The German finance minister was opposed, but his Bavarian constituency has a huge defence industry. Pork-barrel politics drives defence expenditure everywhere.

The Eurofighter is a good example of mad defence spending. It's a combat plane designed in the Seventies, yet there hasn't been a dogfight since the Battle of Britain, and there won't be again. It was the Sidewinder missiles that knocked out the Argie planes, not Red Baron stuff. So why? "Thousands of British jobs depend on it," said every mindless BBC bulletin last week - the old Polish argument, though at pounds 1.1m a job, Eurofighter is rather more costly than horse-breeding. We can manage to close the coal and steel industries but not cut defence jobs, perhaps because a total audit of defence sales, including subsidies and bribes, would reveal that we make a loss.

Will this review tell us at last who we are? Dare it suggest that if we can abandon millions to Chinese dictatorship, we can hand Gibraltar back to democratic Spain? Or that we cannot defend every eccentric group of ex-pats all over the world? That we are not the world's governess, but part of a European alliance with few obligations beyond collective ones with our Nato allies? We wait to see.

Instead of Friday's seminar, the MoD top brass should have attended an Ofsted inspection, or the budget meeting of a hard-pressed district hospital. Or spent the day in a magistrate's court. Then they might have seen who we really are.