View Full Version : Row over Tory plans to axe £30bn defence projects

09-16-2009, 12:30 PM
Three of Britain’s biggest defence projects with a combined value of nearly £30billion could face the axe if the Conservatives win the general election next year.

George Osborne, the Shadow Chancellor, said in a speech on the economy that he would hold a Budget within weeks of a victory. Afterwards, he was asked to identify specific savings that an incoming Conservative government might make.

In comments that surprised and dismayed his own colleagues, he cited the £20billion Eurofighter/Typhoon project, the £4billion project to build two aircraft carriers and the £2.7billion order for 25 A400 transport aircraft as areas ripe for cuts. Later, however, he admitted that he did not know what penalties might have to be paid out under break clauses if the contracts were scrapped.

The RAF already has 55 Eurofighter/Typhoons, costing £3.8billion, and the Ministry of Defence has spent about £1billion on early work on the two 65,000-tonne aircraft carriers. More than £500million has been spent on the A400M programme to replace the ageing C130K Hercules planes. This year The Times revealed that he was looking at ditching the Airbus A400M, which has been dogged by technical problems and is years behind schedule. A senior Conservative source denied that any specific projects had been earmarked for cuts.

Mr Osborne’s intervention appeared to surprise senior colleagues, including Liam Fox, the Shadow Defence Secretary.

The Conservatives have said in the past that such decisions should be taken as part of a strategic defence review. A Tory frontbencher said that Mr Osborne had been “amateurish” to raise question marks over projects without making clear the context in which final decisions would be taken.

The defence industry said that Mr Osborne’s warning of defence cuts was short-sighted, damaging for the Armed Forces and bad news for the 300,000 people working on military equipment projects.

Yesterday, Bob Ainsworth, the Defence Secretary, exposed a potential Cabinet clash over the fate of the Trident replacement programme, which could cost £20billion.

Speaking at King’s College, London, Mr Ainsworth insisted: “There is no intention on this Government’s part of moving away from our position on Trident.”

The Government declared in a White Paper published in December 2006 that it intended to replace the existing Trident ballistic-missile deterrent by 2024. Mr Ainsworth said that the only decision still to be taken was whether the Government would order three or four submarines to carry the deterrent.

Lord Mandelson, the Business Secretary, told the BBC Radio 4 Today programme that no final decision had been made and emphasised that nothing had been ruled out. But Mr Ainsworth later insisted that the Government did not intend to change its position. He said that tough decisions would have to be made next year and that there appeared to be no appetite in the country for bigger defence spending. “Quite the reverse,” he said.

Mr Osbone revealed the Tory plans for a snap Budget after insisting that cutting public spending would not choke off a recovery.

He told a conference organised by the Spectator magazine that Gordon Brown’s admission that cuts were inevitable amounted to a “white flag” and claimed the Tories had “comprehensively won the spending argument”.

But, anticipating the next front in the election battle, he said it was important that Britain’s economic policy did not repeat the mistakes of the past. Unless spending and debt were brought down rapidly any recovery would be short-lived and illusory, he said, adding that a Conservative administration was determined not to “pump up the bubble again”.

He cited the three defence projects when asked to identify specific savings for a Budget, although he added: “There are some things we do not know. I do not know the details of some of the major defence projects which have been the subject of speculation in the newspapers. I simply do not know what the break clauses are in the Eurofighter programme or the A400M or the aircraft carriers. We do have those limitations.”

In his speech Mr Osborne dismissed the Government’s VAT cut — which was opposed by the Tories — as having had little effect in bringing Britain to the brink of recovery, claiming that low interest rates had been the key to limiting the recession.

Ensuring that interest rates are kept low would be an over-riding policy objective of an incoming Tory administration, he said.