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Conservatives Will Renegotiate U.K. Defense Contracts

April 20 (Bloomberg) -- Opposition Conservative defense spokesman Liam Fox said his party will renegotiate major U.K. defense contracts to save money if it wins the May 6 election.

“We will have to look at all contracts again,” Fox said in an interview in London late yesterday. “All major defense contracts can be better value for money.” He said that “right across the business world people are re-examining contracts to see how they can save money in a recession; the same has to happen in defense.”

The Ministry of Defense won’t be able to afford as much as half of the equipment it is seeking to buy in the next decade, according to a report into procurement last year by Bernard Gray, a former government adviser. The most recent estimate by lawmakers last month said the ministry plans to spend as much as 36 billion pounds ($55 billion) more than allocated to it over the coming decade.

The election next month means the U.K.’s political parties are debating which areas of spending should be protected from cuts as the government reduces its record budget deficit. Though the Conservatives pledge they won’t cut military spending while they review Britain’s defense strategy, Fox said examination and any renegotiation of contracts would start “straight away.”

Polls indicate the election is likely to produce a Parliament in which no party has a majority. That might leave the Conservatives or Prime Minister Gordon Brown’s Labour Party dependent for backing on the Liberal Democrats, whose support has climbed in the past week.

‘Not Realistic’

Fox said Labour will not allow the opposition access to the defense ministry’s accounts, so “our first point of call is to get the information about where the contracts are,” he said. “The idea that whatever the economic circumstances the taxpayer will pay the same amount of money is not realistic.”

Fox, 48, who would probably be David Cameron’s defense secretary if the party wins power, said “changes will have to be made” across Britain’s army, navy and air force. “I think the job of the secretary of state is purely to do what is in the country’s national interest. We are not going to be crowd-pleasers.”

‘Airpower Projection’

Asked whether the Conservatives would reconsider a 4.9 billion-pound ($7.5 billion) order for two aircraft carriers, Fox said, “One of the aims of foreign policy is to be able to project power to other continents alongside the United States and France. It’s quite hard to do that without airpower projection and sea-based airpower projection is a logical way to do it for an island nation like the U.K.”

The costs tied to scrapping the order would outweigh savings, the ships’ builder, Babcock International Group Plc, said in November.

“Exactly what the figures will be for that program, what the different options are, we wait to see,” Fox said. “It is one of the areas where we know nothing about costs.”

Asked if he was worried by potential negative headlines if a particular military chief thinks his force is being treated unfairly, Fox said, “It’s not the job of the secretary of state to keep the chiefs of staff happy, it’s the jobs of the chiefs of staff to serve the government of the day.” He said “we are very fortunate in that we have three extremely talented chiefs of staff.”

Some defense procurement projects may have been overtaken as Britain’s defense priorities have shifted since the last strategic review in 1998, Fox said.

‘Legacy Projects’

“I think what this defense review needs to do is say what of the legacy projects and of the legacy costs can be now jettisoned given that the world has moved away from the cold war?” he said. “And what investments do we have to make in terms of future threats and that is a very difficult decision because a lot of the future threats are not necessarily things people will be able to see -- a lot of cyber warfare for example.”

The Liberal Democrats say they would also review all major defense purchases, cancel part of an order for Eurofighter jets and increase co-operation with other European countries. Labour’s election policy platform says the government is “reforming defense procurement,” without giving details.

To contact the reporter on this story: Kitty Donaldson in London at

To contact the editor responsible for this story: James Hertling at

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