Bean counting


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A major political furore has erupted over the finances of UK's National Health Service (NHS), currently facing a predicted £600m deficit. The overspend has been labelled a "crisis" by Tory leader David Cameron, and has precipitated calls for Health Secretary Patricia Hewitt to resign.

£600m certainly sounds like a lot, and it is. It's enough, for instance, to recruit and retain nearly 2000 new teachers for ten years; or to fund a 60% increase in our bilateral aid to Africa. [1]

But amidst all this general foaming at the mouth, politicians and media have been entirely silent about the fact that a £600m overspend is peanuts for one government department whose Treasury largesse nonetheless never dries up, and whose Secretary of State is never slow handclapped: the UK Ministry of Defence.

The NHS' forecasted overspend is around 0.75% of its £80bn budget. By contrast, the MoD's procurement of military equipment was actually praised late last year by the National Audit Office because its projected overspend on just 20 'major projects' dropped to a mere £2.7bn - around 10% of the projects' budgets.

So what's being done? In the NHS, nurses' jobs are being slashed. Is the MoD at least getting rid of the contractors wasting billions of pounds at taxpayers' expense?

Not exactly. At the centre of this massive overspend is UK arms giant BAE Systems, whose contracts made up over 50% of the MoD's entire budget last year. BAE has an established track-record of leaching money out of the public purse. In 2003, it and its associated companies were responsible for four MoD projects that alone collectively accounted for a £2.7 billion cost overrun, and were delayed by 113 months.

Yet rather than opening out the market to more reliable companies, the MoD is narrowing its circle of friends. Its 2005 Defence Industrial Strategy (DIS), a blueprint for the UK's military procurement for the next decade, actually reduces competition for contracts, identifying industrial partners covering "key industrial capabilities" who will basically receive MoD contracts without having to bid for them. Conveniently, these key areas cover BAE Systems' main areas of interest. In the words of BAE's Chief Executive, Mike Turner, describing BAE's lobbying efforts to shift the DIS in their favour, "we have got what we asked for". Or as one member of the Parliamentary Defence Select Committee put it earlier this year, "the government is in danger of conflating the interests of one private company with the interests of this country".

But wait. These major project overspends are merely the appetiser. They pale in comparison to the greatest boondoggle of them all: the Eurofighter Typhoon.

During the early 1980s, European countries identified a common need to defend against massive air attacks from the communist block. In response arms companies from four European countries were tasked with developing the Eurofighter. Britain ordered 232 planes, originally projected to cost around £7bn. Things went wrong early on. By 1997, Alan Clark, former Minister of State for Defence, was remarking that the Eurofighter was “essentially flawed and out of date ... we must find a less extravagant way of paying people to make buckets with holes in them”.

The Eurofighter Typhoon became operational in 2004, ten years late, and long after the mothballing of the mass fleets of Soviet fighters it was specifically designed to dogfight. It has taken over twenty years to make, and to date has cost the UK alone more than £19 billion (see from page 113 here) - £12bn more than first projected.

Let's get this straight. That's about £350 for every adult and child living in the UK; the equivalent of paying £1.1 million for every job that the Eurofighter project is said to sustain. At least the £600m NHS overspend has been spent trying to save lives, on hospitals, medical staff, defibrilators and drug supplies. The Eurofighter will probably never be used as intended, and instead sits unused on runways around the UK, at yet more massive cost.

And who is the main UK partner on the Eurofighter, trousering their share of the massive Eurofighter overspend? BAE Systems, the MOD's favourite arms company, now gifted with yet more secured MOD contracts for the next decade.


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