Post-election blues for MoD as budget cuts bite

The future of at least one major defence project could be under threat from funding shortages and further spending cuts after the general election.

The future of at least one major defence project could be under threat from funding shortages and further spending cuts after the general election, industry experts warned this week.

The Future Aircraft Carrier project, which will cost £2.6bn to build, could be in doubt as the Ministry of Defence’s budget is seriously over-stretched, said Alan Sharman, director-general of the Defence Manufacturers’ Association. These shortages will force the MoD into some difficult decisions, he told The Engineer. ‘The MoD can’t afford all of its projects. The carrier is such an expensive part of the future programme, that it might have to be reviewed.’

The carriers, capable of operating 50 aircraft, are due to enter service in 2012. BAE Systems and Thales are competing for the contract, to be awarded in 2003.

Tories attack

The Conservatives have accused the government of planning further defence cuts if it wins the general election, which Tony Blair this week announced would take place on June 7.

Iain Duncan-Smith, shadow defence secretary, accused Labour of planning ‘across the board’ cuts. ‘The government is being told by the MoD it has to spend proper sums on recruitment and equipment, and it is short billions of pounds,’ he said.

Meanwhile the Joint Strike Fighter, the aircraft planned for the carriers, is believed to be the most likely casualty of a US defence spending review, launched at the start of George W Bush’s presidency. Other projects, including the Star Wars programme, are likely to mean the JSF is pushed out of spending plans, analysts believe.

BAE Systems is involved in both bids to build the JSF, and any delay or cancellation would also affect UK manufacturers further down the supply chain.

Professor Keith Hayward, head of economic and political affairs at the Society of British Aerospace manufacturers, said the JSF project would mean a major chunk of business for UK aerospace suppliers, and any threat to its future would be a cause for concern. ‘If you look at the shape of the US defence budget and the forces shaping it, you are always going to be concerned. You can never guarantee a US procurement programme until the aircraft come off the production line, and even then Congress can still interfere,’ he said.

This would also affect the carrier project. The MoD has agreed to buy JSF aircraft for the carriers, so plans would be affected if it were forced to find a replacement, with much of the initial design work already completed.

One possible replacement for the JSF could be a navalised version of the Eurofighter, meaning UK suppliers would still benefit, Hayward added. But Eurofighters would require a much larger carrier, leading to costly design changes which could again cast doubt over the project’s future.

A spokesman for the MoD hinted cuts may be on the agenda: ‘Planning involves comparing increasingly uncertain resource assumptions. We have to look at the long-term and determine priorities.’

The government’s long-awaited decision on who is to build 12 Type 45 destroyers is also expected after the election. The government has commissioned consultants Rand Europe, a wholly owned subsidiary of the US Rand Corporation, to review its warship procurement strategy for the next 15 years.

The MoD called in the company, which also conducts research into the aircraft and shipbuilding industries for the Pentagon, to help resolve an ongoing dispute between BAE Systems and Vosper Thornycroft.

Government under fire

The government has been accused by some analysts of passing the buck, as the decision could cost hundreds of jobs at either BAE’s Scotstoun and Govan yards, or at Vosper on the South coast.

But Sandy Morris, analyst at ABN Amro, said this is a cheap shot: ‘The mantra from the MoD has been competition, competition, competition, and that’s been drummed into them over the last decade. So it’s now taking quite a leap to suggest there might be another way of doing things.’

One of the issues under review is whether BAE Systems should be allowed an effective monopoly over large warship building, leaving Vosper to specialise in smaller craft.

The government has obviously decided BAE’s proposals are worth taking seriously, said Morris. ‘BAE is at least getting a fair hearing now.’