Trident (Hansard, 29 January 1985)

§ 1. Mr. Strang
asked the Secretary of State for Defence if he will now announce his revised estimate of the cost of Trident.

§ 2. Mrs. Clwyd
asked the Secretary of State for Defence when he expects to announce the latest cost estimate of Trident.

§ 6. Mr. Meadowcroft
asked the Secretary of State for Defence what is the most recent dollar-sterling exchange rate of which the review of Trident costs has taken account.

§ The Secretary of State for Defence (Mr. Michael Heseltine)
Each year the long-term programme of my Department is re-costed as part of a planning process. Established convention indicates that I should assume a dollar exchange rate of £1 to $1..38. The updated Trident figure on this basis, and at average 1984–85 prices, is £9,285 million. Approximately 55 per cent. of the work by value is planned to be undertaken in the United Kingdom. I see no case for changing the conventions on which this Government and previous Governments have worked. However, in view of public interest, I am making available to the Select Committee on Defence and the Public Accounts Committee an indication of the effects of the changes in the exchange rates so that those wishing to predict exchange rate changes over the procurement period of the Trident programme will be able to do so at the exchange rate that they consider appropriate.

§ Mr. Strang
Will the Secretary of State admit that that cost is a gross underestimate, taking into account the current dollar-sterling rate? Will he further admit that the 55 per cent. figure in the United States is also an underestimate? Is it not outrageous that thousands of millions of pounds are to be spent in the United States on American technology and jobs? How can the right hon. Gentleman defend that situation to the millions of unemployed people in this country?

§ Mr. Heseltine
No doubt inadvertently, the hon. Gentleman has got the figures wrong. The figure that we believe to be right is about 55 per cent. of the cost in the United Kingdom, as opposed to 45 per cent. as the hon. Gentleman says. The issue is whether Britain needs its own independent nuclear deterrent, and whether the D5 Trident system is the appropriate one. That was the decision reached by the Government, and upon which they were elected. It would not be difficult to persuade the British people, employed or unemployed, that the security of these islands depends on Britain's independent deterrent and associated defence policies.

§ Mrs. Clwyd
The Secretary of State will no doubt recall telling the Select Committee on Defence on 22 May 1984 that the whole submarine will be built here. How can he say that when £17 million worth is being built in the United States and another so-called design contract costing $63 million has been given to General Dynamics 135 Corporation? Does he not recognise that, to use a favourite phrase of the Government, he has a grossly uneconomic weapon, which should be scrapped forthwith?

§ Mr. Heseltine
The hon. Lady does not believe that Britain should have an independent nuclear deterrent, and nor does the Labour party, to which she belongs, but that party was soundly beaten in the election, one of the reasons being precisely that conviction. I do not have the record of my evidence to the Select Committee in front of me, but I shall check it. The submarine will be part of a contract that we intend to place with Vickers. We think that within that contract the American contribution could be about 10 per cent.

§ Mr. Meadowcroft
Is there not a point at which the exchange rate will reach such an extreme that the missile system cannot be ordered without it causing immense damage to other conventional defence spending, unless the matter is fudged by extending the procurement life, presumably even beyond the life of the missile system?

§ Mr. Heseltine
The hon. Gentleman has asked two questions, the first of which concerns the changing assumptions in the period concerned. Ministers have given no authority to change the assumptions on which the costing has taken place. I have added a further instruction to my Department that there will be no change in the assumptions and that, subject only to security considerations, if there were in my view to be a need to change the assumption I would report that fact to the House. Otherwise, the position remains as it was when Sir John Nott first explained the circumstances relating to D5 to the House in March 1982. There will not be a spread, as has been suggested. I agree that trying to predict 18 or 20 years ahead for a programme of this type produces some elements of guesstimate at the tail end of the period.
The hon. Gentleman also asked about the scale and impact of the programme on the defence budget. It is a very large programme, but the House will take account of the fact that, when the Tornado programme was in its early stages, it was a larger proportion of the defence budget, which, in turn, was smaller than it is now. I do not remember there being a great outcry from the Opposition that there was no way in which we could accommodate the Tornado programme in the smaller defence budget of the time.

§ Sir Anthony Buck
Does my right hon. Friend agree that it is important to emphasise that the programme will enable us to retain a capability which successive Governments have thought it appropriate for us to have and that more than half the money that is to be spent will be spent in the United Kingdom?

§ Mr. Heseltine
My hon. and learned Friend is correct. He and the Government believe that an independent British nuclear deterrent is an essential part of the strategy that has kept the peace in Europe for a record period in contemporary history. As those policies patently have worked, and continue to work, we believe that they should be continued.

§ Mr. Heathcoat-Amory
Does my right hon. Friend agree that cost can be assessed only in relation to effectiveness? Is he worried that the development of star wars defence systems might render Trident ineffective? Does that make a case for the development of alternative non-ballistic systems, which might also be cheaper?

§ Mr. Heseltine
My hon. Friend raises an important question, but the time scale in which those questions will be answered provides the answer to his question. The star wars project is a research project which will cover a period of time which will ensure that, even if the Americans determine to go ahead with the project—nobody knows whether they will have the capability or, in the end, will take such a decision—the fact remains that we should have Trident in service long before that. It would play a critical role in the defence of the West long before the star wars project could be implemented.

§ Mr. Steel
Will the Secretary of State confirm that three things have changed since the Government first took their decision: first, that the cash cost of the project has virtually doubled; secondly, that the time over which it is planned to repay it has been lengthened twice; and, thirdly, that the value of contracts to British industry has declined as a proportion of the total? Does he agree that those changes mean that we should re-examine the programme and decide whether, in the interests of British defence and industry, we should go for more spending on conventional defences?

§ Mr. Heseltine
The right hon. Gentleman will know that we have increased the defence budget by about £3,000 million in real terms and that that enhancement is broadly continuing into the future. It has given us vast extra resources, part of which will be spent on Trident. I have read the right hon. Gentleman's speeches in which he suggests that assumptions have been changed. How does he square that with the comments of my predecessor, Sir John Nott who said: I can confirm that we are talking about large numbers of jobs for British industry and a huge programme which will stretch over the period of 18 years." — [0fficial Report, 11 March 1982; Vol. 19, c. 979.] If the right hon. Gentleman had the courtesy to reflect that statement in his speeches to the House, his facts would be more accurate than they are without such reference.

§ Mr. Bill Walker
Does my right hon. Friend agree that the Trident programme is unique, in that the envisaged costing covers the whole programme and everything that is required for Trident? All other defence expenditure costing does not include everything. For example, the Tornado programme did not include hardened shelters and the other necessary facilities. The same is true of warships and everything else. Does my right hon. Friend agree that when people talk about the cost of Trident it is the whole cost, whereas for all other defence programmes it is not?

§ Mr. Heseltine
My hon. Friend has made a most important point. It is especially relevant to his example of the Tornado programme. It took up a bigger proportion of the defence budget. It was a more expensive programme on a lower defence budget. The costing for it gave us only an aircraft that could fly. The weapons systems with which it had to be equipped and the infrastructure from which it would fly had to be added to the cost. That shows dramatically that, although the cost of Trident is large, because it is of such significance to the defence of the United Kingdom it is containable in our much larger defence budget.

§ Mr. Duffy
Even if the Secretary of State can contain the financial cost of Trident, is he not incurring greater opportunity costs in terms of the Alliance's real needs, which, on the military side, are sustainability in Europe 137 and, on the political side, conventional initiatives that will raise the nuclear threshold? Is he not in danger of appearing to behave as irrelevantly to the real needs of the Alliance with his Trident programme as President Reagan is with his star wars programme?

§ Mr. Heseltine
It was precisely because the Government wanted to increase conventional capability that we took decisions which have added £3,000 million to the defence budget in real terms. Precisely for the reasons that the hon. Gentleman has put forward so articulately, we could not understand the proposal to reduce the defence budget by one third, on which he campaigned at the general election.

§ Sir John Farr
I recognise the importance of Trident to us, but is my right hon. Friend aware that it would be much easier to support this policy if there were a bigger percentage of home-produced content in the weapon? Will he re-examine the weapon's control system to see whether it is possible for British contractors to quote for that part of the contract?

§ Mr. Heseltine
I agree with my hon. Friend that it would be attractive if, in the concept of the two-way street, there were a larger United Kingdom component in the Trident programme. It was one of the many contracts in existence when we joined, and it is extremely difficult for contractors to break into a pattern of industrial organisation of that sort. Attempts are being made and a significant number of companies are involved in the process, although not as many as I should like. That has to do with the companies themselves, not just with the attitudes of the British or American Governments. I would not want to pretend that, where we had to make a major decision about this uniquely important defence system, we were able to negotiate offset arrangements of the sort that characteristically we would want. Whereas on the concept of the two-way street the Government have a 2:1 adverse ratio, in the not-too-distant history it was a 4:1 adverse ratio.

§ Mr. Denzil Davies
In case the Secretary of State has not heard this news, let me tell him that the pound is not standing at $1.38 but is hovering around $1.10. That puts another £700 million, as he well knows, on the figure that he has given to the House. Therefore, the figure is £10 billion, not the £9.2 billion that he mentioned. Why does the right hon. Gentleman make himself look so ridiculous by pretending that all that money can be found without making substantial and savage cuts, in Britain's real defences? Apart from a perverse vanity, what is the point of going ahead with this weapon, which no rational person could contemplate using, and which, if it were used, would turn our island into a pile of irradiated rubble?

§ Mr. Heseltine
Are we to gather from the right hon. Gentleman's statement that the nuclear weapons which the Labour Government thought so necessary were useful, whereas the Trident programme is not? The Labour Government consistently maintained Britain's indepedent deterrent and, in secret, modernised it through the Chevaline process. Yet this Government, who are merely continuing the same programme, have apparently lost that support.