Thursday, December 15, 2005

In the national interest?

As flagged-up this weekend, the much-heralded Defence Industry Strategy has been published by the MoD today.

The report, running to 145 densely-printed pages, purports to set out "those industrial capabilities we need in the UK to ensure that we can continue to operate our equipment in the way we chose".

When the strategy was first announced last August, we remarked on the apparent coincidence, that it would be appearing just in time to pre-empt the publication of the EU's own list of what defence capabilities should be reserved by member states, and which should be opened out to international (i.e., European) competition.

Predictably, there is no mention whatsoever of this EU involvement and it is entirely up to the reader to decide whether the publication of the MoD document - which so admirably performs a task that the commission would require – is in fact a coincidence. Those who might believe this will probably also have a view on the tooth fairy.

The problem in assessing the merits – and the underlying political agenda – of this report is that, after years of defence procurement disasters, and a shrinking market for defence equipment which is causing considerable difficulties for defence contractors, some sort of industry strategy was needed. The MoD, on the one hand, needs to be assured that there is the capability it needs while, on the other, the industry needs some commercial stability and predictability in order to plan its business.

Predictably, the Beeb – which is amongst the first to report on the review – focuses on this aspect, with the website headline: "Defence industry faces shake-up", recording defence secretary Reid's statement that the "UK defence industry must be restructured", adding that In future the government will expect manufacturers to focus on hi-tech weapons, but basic items such as ships' hulls could be built abroad".

Stressing the objective of the review, the MoD is reported as stating that some technology is so militarily sensitive it has to be made in the UK, but it does not dwell on those areas of military production that the government feels can be allowed "off-shore".

One such, which we have covered, is the manufacture of military explosives, with BAE Systems about to close down the last facilities in the UK.

On this specific issue, the report is extremely vague. Having waxed lyrical about how we "maintain our sovereignty and national security", recognising that "industry may make independent decisions which would lead to the disappearance of indigenous capabilities required to maintain our national security", it then blithely suggests that "if offshore supply could be guaranteed there would be no need for onshore manufacture".

The fact is, of course, that the UK is already reliant on offshore producers and it is from such bland statements that one gets a sense that this long document is more window-dressing than substance, not least when it also remarks that the government is prepared to consider "new armoured fighting vehicle prime contractors being from offshore". Anodyne enough, but it does not remind us that it already has a Memorandum of Understanding with the Swedish government for the development of armoured vehicles for the FRES programme.

Nevertheless, the Beeb tells us that the CEO of BAE Systems, Mike Turner, is "over the moon" with the new strategy, but then his company is a multi-national conglomerate, the interests of which are not necessarily the same as the British national interest.

And there is the crucial issue. The report speaks often of the national interest but, distilled down to its essence, it conceded vast tranches of national defence capacity to offshore interests. Having done so in 145 pages, when the list could have been dispensed with in no more than a dozen, one gets the impression that it is burying the bad news in a welter of detail. To a very great extent, this is, as we first billed it, the final sell-out.

Photo: a Challenger 2 at speed. Copyright© 2005 BAE Systems.


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