UK Conservatives dismiss defence cuts report

LONDON, April 27 (Reuters) - Britain's opposition Conservatives dismissed a report they were considering cuts in defence spending to reduce the budget deficit if they win an election due by mid-2010.

The Times said Conservative finance spokesman George Osborne and his defence counterpart Liam Fox were in discussions about whether to include the A400M transport aircraft and the Future Strategic Tanker Aircraft programme in a package with potential savings of up to 3 billion pounds ($4.4 billion).

Fox denied the report.

"The Times' suggestions about defence cuts are totally unfounded," he said in a statement.

"There has been no meeting between myself and George Osborne to discuss defence cuts. We will conduct a strategic defence review on entering office and will base our procurement decisions on the outcome of the review," he added.

Britain and Germany have threatened to pull out of the Airbus A400M project because of their anger over delays in production. Britain ordered 25 of the troop transporters out of an initial 180 orders placed by seven nations.

The Tanker programme relates to a deal to supply mid-air refuelling aircraft, a contract awarded last year to a consortium led by Airbus parent EADS (EAD.PA).

The British government said last week the budget deficit this year would climb to 175 billion pounds, more than 12 percent of GDP. How to cut this figure will be a central issue in the election campaign.

Opinion polls show the Conservatives, out of power since 1997, on course for victory. (Editing by David Holmes)