Defence procurement in the UK is a racket – so what’s the solution?

Duncan Simpson

September 5, 2018

News emerged yesterday that the Treasury is getting into a terrible flap about UK Export Finance’s underwriting of a defence contract with Qatar. The deal, worth some £7 billion for 24 Eurofighter Typhoons, could see the taxpayer shafted if it falls through. The greater issue, though, is why a contract like this is underwritten in the first place.

UK Export Finance supports British exports by issuing insurance contracts to UK companies. But why should this industry – or any other industry – be given guarantees from the state as it conducts its business? Defence contractors have long benefited from this tacit backing from taxpayers, yet this arrangement is just the thin end of the wedge for how the industry and government have mismanaged procurements of weapons and delivery systems for generations.

Defence procurement in the UK is currently a racket. Ministers, civil servants and others in positions of authority have long been in cahoots with defence companies to ensure that taxpayers pay over the odds for equipment that is often late, inadequate and wildly over budget. Civil servants flirt with projects that take generations from the design until the decommission. Ministers are even more ephemeral. And interservice demands for the latest equipment push politicians to make decisions that benefit a narrow cartel of defence contractors, rather than taxpayers and the troops who use the equipment.

Just a few examples point to this. In 2010, British Aerospace Systems metaphorically put a gun to David Cameron’s head when he was deciding whether to buy one or two new aircraft carriers. The chief executive at the time, Ian King, demanded that the government buy both since the cancellation of the second would cost more than simply going ahead and building it.

Or consider the retinue of procurement blunders with helicopters. Britain decided to build the Boeing-designed Apache attack helicopters in the UK at a unit cost of almost £40 million. The Israelis, on the hand, bought them off-the-shelf and directly from the Americans for £12 million. The Ministry of Defence also spurned an offer to buy Black Hawk helicopters, instead deciding to purchase the much delayed and fantastically expensive Merlin helicopters – also made in the UK.

These instances happen repeatedly because ministers labour under the illusion that the UK must retain a sovereign capability. We can’t, they say, always rely on other countries, so we need the ability to do everything ourselves. Yet the A400M, a transport aircraft produced by Airbus, requires various permissions to be granted by the different governments that partake in the manufacturing, research and development before production can be completed and exports granted. Buying weapons and equipment from one country, say the US, would simplify this.

This is not to say that the sovereignty argument is completely wrong. It’s probably best if a Sino-Russian consortium doesn’t build the Royal Navy submarines that carry the UK’s nuclear deterrent. And the MoD’s ability to manage urgent operational requirements is actually rather good, especially during wartime.

But, ultimately, ministers need to be far more willing to buy off-the-shelf US products which have been tested and used before. This would be good for taxpayers and the armed forces, and it would also recognise an unfashionable truth: building weapons – or anything else for that matter – in the UK just for the sake of it is a foolish way to approach defence procurement.


Written by Duncan Simpson

Duncan Simpson is a policy analyst at the Taxpayers' Alliance.


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