Time the Whitehall Gunrunners were Fired

Gordon Brown plans to cut 100, 000 civil service jobs in the next ten years. This has Non Governmental Organisations, as well as opposition parties, scurrying to suggest which civil service departments should be in the firing line. Not surprisingly campaigners against arms exports, like Campaign Against Arms Trade, suggest the Defence Export Services Organisation (DESO) and the part of the Export Credit Guarantee Department (ECGD) dealing with arms exports are suitable choices.

We estimate that each year arms exports cost the public purse about £888 million in subsidies. Put another way, arms companies based in the UK are receiving a handout of £13,000 for each job in arms exports each year. Of these subsidies the 600 civil servants in the Defence Export Services Organisation (DESO) cost about £ 16 million each year.

There are few market sectors where civil servants act as sales representatives for them, but arms exports are one. Given the dominance of BAE Systems amongst the UK based arms companies, it has about two thirds of the market share, then it’s fair to say that many of those civil servants in DESO are the sales representatives of BAE Systems, but at public expense. The patronage goes further as ambassadors, embassy staff and the military act for DESO and hence the UK based arm companies. At Farnborough International 2004, also known as the Farnborough Airshow, then DESO used teams of soldiers in it’s ‘Export Support Teams’ to demonstrate military equipment. The 46 foreign military delegations attending Farnborough were arranged by DESO; indeed there are Government grants to pay for the travel of foreign buyers to arms fairs like Farnborough. No other business sector can draw on that kind of patronage or the impression of legitimacy it creates– even using Government ministers to promote sales. On occasion the royal family, especially Prince Andrew, has also lent a hand too. Private companies could hardly ask for better access to the political establishment than the intermeshing of arms companies and the civil service that exists today. The cost of public subsidies for these civil services: another £30 million or more.

Export Credit Guarantees, put simply - cheaper insurance for sales abroad, are routinely issued for major arms sales. Nearly half the work of the civil servants in the ECGD is related to arms exports; the cost of the civil servants and the credit guarantees issued subsidise UK based arms companies to the tune of about £180 million each year.

Time and again UK procurement has been distorted by ‘buying British’ in order to promote arms exports. It’s extremely important for UK based arms companies that the UK military choose its products over alternatives – even if the alternatives are more cost effective. Arms companies lobby hard for UK Government patronage and not just for the value of the order itself. After all, if the UK Government won’t buy arms companies products why would anybody else? The decision by the Ministry of Defence in July 2003 to buy BAE systems Hawk Mk 128 aircraft over jet trainers from other companies, supposedly by a Cabinet Office veto, is a case in point. The estimated distortion to UK procurement to support arms exports amounts to about a £100 million each year.

The biggest loss to the Chancellor is in unre-couped technology fees – a whopping £640 million each year providing yet another subsidy for arms exports. The Government recognises that there is leakage of Government monies for research and development when arms are exported, so a commercial exploitation levy is demanded. The levy raised £ 11.83 million for 2003- 2004; a derisory amount given the billions of pounds worth of UK arms exports and the high research and development costs for the industry.

Those defending subsidies for arms exports point to the upside; longer production runs of military equipment reduce overheads thus leading to savings on UK procurement. However these savings are only about £125m a year; the estimated £888 million a year of subsides is less this saving.

The truth is that UK based arms companies don’t pay their way when exporting. On economic grounds alone arms exports should be stopped. While politicians may point to the political value of arms exports, which is also disputed, we should be clear that on economic grounds the public subsidies given for arms exports are nonsensical.

Writing and research by Andrew Wood and Ian Prichard of Campaign Against Arms Trade, see www.caat.org.uk for further information.