According to the Telegraph, the Prime Minister has been "warned" that the Army "will be hit by a damaging wave of resignations" if ministers make fresh cuts in allowances for the school fees of servicemen’s children. Officers, including elite Special Forces commanders, are said to be prepared to quit over the issue:

The Ministry of Defence is preparing to set out new cuts in the funds given to Armed Forces personnel to educate their children.

The prospect of new cuts in the Continuity of Education Allowance next month is said to be having a “devastating” effect on the morale of many senior soldiers.

It is understood that Mr Cameron was personally warned about the impact of more cuts by one of the most respected Special Forces commanders.

A former commander of the SAS, he is soon to take up a new post as Director Special Forces, overseeing all of Britain’s elite troops.

The officer, whose identity cannot be published, attended Eton College at the same time as Mr Cameron and remains close to him.

It is understood that over lunch, the officer told Mr Cameron that the Government’s CEA cuts could prevent him sending his sons to their old school.

After the officer’s warning, Mr Cameron is understood to have asked his officials for details of the planned allowance cuts.

On top of that, a list of senior officers who are prepared to quit has been passed to one of Mr Cameron’s closest advisers. Among the names on the list is a senior officer serving with the SAS.

The Ministry of Defence spends almost £180 million a year on the education allowance, which is intended to help military families keep their children in the same school while their parents move around the world to different postings. The allowance is sometimes derided as an officers’ perk, but all members of the Armed Forces are eligible for the scheme.

About half of the 5,500 claimants come from “other ranks”. Changes announced last year will cut the cost of the allowance by almost 20 per cent over four years.

However, a wider review of the allowance was also begun, raising speculation about further reductions.

The review, originally expected in the spring, is due to be published early next month. Many servicemen fear the review will mean deep cuts in the allowance.

Some Service parents are said to have delayed sending their children to new schools next month because they are not sure they will be able to pay the fees.

As well as cutting the cost of the allowance, the review is also expected to contain measures to make it easier for Service children to attend state schools.

A Ministry of Defence spokesman said: “We are determined that the Continuity of Education Allowance should go only to those who really need it. These changes are aimed at saving £28 million a year.

“We must make sure that all allowances are fair and appropriate.”

Source story, by James Kirkup, Political Coorespondent, Daily Telegraph