2 Managing dependence on the United
8. The United Kingdom and the United States have
a long history of collaboration on major defence projects.
Collaboration on various aspects of the United Kingdom's nuclear
deterrent programmes has taken place under the auspices of the
1958 Agreement for Cooperation on the Uses of Atomic Energy for
Mutual Defence Purposes and the 1968 Polaris Sales Agreement.
9. In an exchange of letters in 2006, the Prime Minister
and the President of the United States agreed that the United
Kingdom would participate in the planned life extension programme
for the Trident D5 missile and that close coordination should
be maintained between the two countries. The United States has
also agreed that any successor to the Trident D5 missile would
be compatible with, or be capable of being made compatible with,
the launch system that the United Kingdom will be installing into
its new submarines.
10. Despite these assurances, collaboration with
the United States on the Trident D5 missile life extension programme
presents significant risks to the United Kingdom's future nuclear
deterrent. The new class of submarine is likely to remain in service
beyond the extended life of the existing Trident D5 missile, which
will be renewed in 2042, and must therefore be compatible with
any successor missile developed by the United States.
Lack of coordination between the United States' missile design
and the United Kingdom's future submarine design may cause the
missile compartment to be incompatible with the extended D5 missile
design. Any form of dislocation or delay in this collaboration
process would have serious ramifications for the Department's
ability to support a nuclear deterrent over the longer term.
11. The Department understands that there is a significant
risk associated with being ahead of the United States. By seeking
to have a shared design for its missile compartment, the Department
has taken steps to reduce the risk of future incompatibility and
is working with the United States to mitigate the immediate D5
missile compatibility risk.
12. There is a general risk that wider political
or economic factors could lead the United States Government to
delay or even cancel their submarine construction programmes.
Whilst unlikely, such an event would impose substantial costs
on the United Kingdom if the Department chose to continue with
its submarine programme without the assistance of the United States.
13. This programme, like others with international
collaboration elements, is subject to exchange rate variations:
in this case between the pound and the dollar. Given the long
timelines involved, large exchange rate fluctuations could have
a significant impact on the budget. In the short term, the Department
has a rolling programme to buy foreign currency forward, which
is intended to mitigate the risk over a three-year period. When
the Department was calculating the costs of the collaborative
elements of the programme, the United States dollar exchange rate
was 1.82. If the
dollar remained at the level it reached in November 2008, the
Department calculated that the additional costs to the future
deterrent programme would amount to around £300 million.
14. Close collaboration and ongoing discussions with
the United States therefore remain critical to the successful
delivery of the United Kingdom's future deterrent. The Department
is confident that several factors, including the 1968 Polaris
agreement, the exchange of letters between the Prime Minister
and the President, and the current high levels of cooperation
between the two countries provide reasonable assurance that it
is doing what it can to mitigate the risk.
The Department is also designing a communications plan to ensure
that the United States receives consistent messages from its various
13 The Future of the United Kingdom's Nuclear Deterrent,
Cm 6994, December 2006 Back
Q 27; C&AG's Report, para 1.12 Back
Qq 5-6, 82 Back
C&AG's Report, para 2.12 Back
Q 27 Back
Q 44 Back
Q 28 Back
Q 29 Back
Q 82 Back
C&AG's Report, para 3.24 Back