MoD halts production of aircraft carriers in new blow for Royal Navy

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http://www.timesonline.co.uk/tol/news/uk/article5324649.ece

From Times Online

December 11, 2008

MoD halts production of aircraft carriers in new blow for Royal Navy

The Royal Navy's most prestigious project, the construction of two

65,000-tonne aircraft carriers, is set to be the biggest victim of a

Ministry of Defence cost-cutting exercise aimed at saving £2 billion

over the next few years.

The programme had already been delayed by two years, and now

Hutton, the Defence Secretary, has announced a further postponement

of up to two years. The commitment to build two large aircraft

carriers as the centrepiece of the Government's new-style

expeditionary strategy was first announced in 1998.

The £3.9 billion bill for the two carriers, the biggest warships ever

to be built for the Royal Navy, however, has caused a major headache

for the MoD at a time when its budget has been squeezed. Despite a

current real-terms 1.5 per cent increase in defence spending, the

budget was simply not large enough to pay for all the huge equipment

procurement programmes in the pipeline.

In a written ministerial statement, Mr Hutton said that the in-

service date would be delayed by one to two years. Construction had

been due to start next April. It seems Mr Hutton has decided to delay

the building of the carriers instead of axing other key projects,

such as the so-called Future Lynx helicopter which was under threat.

Mr Hutton confirmed that the Future Lynx helicopter to be built by

AgustaWestland, based at Yeovil in Somerset would go ahead. This is

potentially worth £1 billion to the company and the programme will

save 500 jobs of people who are already working on the project. The

original contract, announced in 2006, was for 70 Lynxes, 40 for the

Army and 30 for the Royal Navy.

Mr Hutton said the Future Lynx would come into service as planned in

2014. He also announced a £70 million upgrade programme for 12

existing Lynx Mark 9 helicopters, fitting them with new engines, to

provide greater capability for operating in the heat of Afghanistan.

The continuation of the carrier programme, albeit delayed, is also

key to saving jobs. About 10,000 jobs are at stake spread around the

country, and Mr Hutton is likely to emphasise that they will be

safeguarded despite the delay in the programme. The carriers are to

be built in four different shipyards – Barrow-in-Furness, Portsmouth,

Govan in Glasgow and Rosyth in Fife – and assembled in blocks. The

principle companies involved are BVT Surface Fleet, a joint venture

combining BAE Systems and the VT Group, Thales UK, Babcock Marine and

Rolls-Royce.

Mr Hutton did not highlight the decision to delay the carriers in his

statement but focused on the need to bring the in-service date of the

warships more in line with the expected delivery of the Joint Combat

Aircraft, the F35, which has been designed by American and British

firms for the carrier role.

The F35 aircraft programme has suffered delays and the aircraft were

not going to be ready for the previous in-service deadline of 2014

for the first carrier, HMS Queen , or even possibly for the

second, HMS Prince of Wales, in 2016.

In addition to the £3.9 billion bill for the two carriers, the

planned order for 250 F35s will add another £10 billion-£12 billion

to the whole programme. Although the money has been included in the

MoD's long-term costings, such expense was deemed to be unrealistic

at a time when ministers were struggling to keep within the budget

settlement agreed with the Treasury.

The delay in the carrier programme is a blow to the Royal Navy which

was originally promised an in-service date of 2012 for the first ship

and 2014 for the second. The price estimate in the early years of the

project was also set at £2.9 billion. Industry told ministers that it

was impossible to build two 65,000-tonne ships at that price, and

there were concerns that the Government would be forced to scale down

the carriers.

Following detailed negotiations, however, the MoD stuck to the 65,000-

tonne concept because the Royal Navy insisted it needed a platform to

take 36 aircraft, and the price duly rose to £3.9 billion. The in-

service date also slipped to 2014 and 2016.

The decision to push back the carriers once again will be seen as a

considerable reversal for the Government which is on record as saying

that it would stick to the 2014-2016 timeline.

The announcement by Mr Hutton followed an internal review of all

equipment which has been going on for several months. The MoD team

involved went to Afghanistan to make sure that whatever cuts or

delays it might recommend to ministers did not impinge in any way on

the requirements for the frontline troops fighting the Taleban in

Helmand province. The cost of the war in Afghanistan, however, is

mainly paid for out of the Treasury's contingency reserves, although

the MoD has to contribute towards some of the costs of the hundreds

of armoured vehicles that have been sent to Helmand in the last 12

months.

The Army's most important equipment project is the £16 billion Future

Rapid Effect System (Fres), a new generation of armoured vehicles

needed to replace the ageing Saxons, Scimitars, Spartans and other

models that have been in service for decades.

Mr Hutton also announced significant changes to this programme. The

MoD announced in May the provisional selection of the Piranha V

vehicle offered by General Dynamics, as the preferred design for the

Fres utility vehicle, the replacement for Saxon. But negotiations

with the company have failed to reach a satisfactory conclusion, and

Mr Hutton said the General Dynamics offer was now going to be

withdrawn.

Instead, higher priority is to be given to upgrading the existing

Warrior armoured infantry fighting vehicle, and the go ahead has been

given for the Fres Scout vehicle, a replacement for the Scimitar and

Spartan reconnaissance vehicles. This will mean that the Fres utility

vehicle will be delayed.

Mr Hutton said that the Fres programme was being restructured partly

because £700 million had already been spent on buying 700 new

armoured vehicles off the shelf to send to Afghanistan.