Douglas Carswell

31 JAN 2013

Higher defence spending or higher spending on defence contractors?

It is good news that the amount of money we spend on defence equipment is set to rise.

After years of cut backs, we have reached the point where we need to make a fundamental decision; Is Britain going to remain a military player, capable of projecting force beyond our shores? Or, like the Dutch or the Venetians before us, is a once great maritime power about to slip into military irrelevance?

News that the government intends to increase spending on ships, planes and drones suggests that there are still some in Whitehall prepared to fight back against the "decline management" mindset.

But spending more money on defence is not enough. We need to ensure that the money we do have to spend is spent in the interests of our armed forces – not in the interests of the contractors.

What financial muscle we still have needs to be converted efficiently into military punch.

Successive governments have for decades encouraged consolidation in the defence industry – first within the UK and now at a pan-European level. This was supposed to ensure better economies of scale, making the industry more viable.

Alas, consolidation has also constrained the supply base – and if you constrain the supply in any market, the seller ends up setting the terms of trade.

The result has been a dwindling range of approved defence contractors, each able to demand an ever greater slice of the defence budget pie.

This ultimately explains why we have often ended up paying vastly inflated prices for kit that arrives late. And why we spent more than £20 million apiece on helicopters when we could have bought ones that would do the job for almost half that amount. And it also helps account for why we are spending vast amounts on, for example, the loitering munitions Fire Shadow programme, when we ought to be putting the money into drones instead.

If we carry on spending the defence budget in the interests of defence contractors, any increase in spending will simply mean more money for the contractors.

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