Memorandum submitted by the Campaign Against
Arms Trade
1. The Campaign Against Arms Trade (CAAT)
is working for the reduction and ultimate abolition of the international
arms trade, together with progressive demilitarisation within
arms-producing countries.
2. Currently, a disproportionate amount
of UK government support and subsidy for exports goes to an industry
whose products are not only controversial in their nature, but
also a drain on the UK economy. CAAT believes the arms companies
have persuaded governments to give them this support because of
the strong links they have enjoyed over decades and not because
any analysis has shown that military exports are good for the
economy or employment. The recession presents an opportunity for
a rethink about the kind of goods that the UK should be manufacturing
and exporting.
3. Manufacture must be considered before
exports. With limited Government resources overall, provision
of export support for an existing industry, such as military production,
could be at the expense of start up investment in newer and potentially
more economically beneficial industries.
4. There is general political agreement
that there needs to be a more environmentally sustainable economy.
In support of this, a credit line of £50 million was
established by the Export Credits Guarantee Department (ECGD)
in 2003, ring-fenced for renewable energy yet, CAAT understands,
to date there have been no applications for such support as the
exports do not exist. This is an example of an industry which
needs to be assisted as it develops and manufacturing is established,
before it can make use of any export support.
SUPPORT GIVEN
5. Military exports account for just 1.5%
of all exports, with 40% of the components for these being imported.
The UK government supports and subsidises them through the promotional
activities of UK Trade and Investment's Defence & Security
Organisation (UKTI DSO), ministers, defence attach
s and other embassy staff; research and development
(R&D) funding; the provision of export credits and distortion
of the UK's own military procurement.
6. It is difficult to put precise financial
values on the support given, but it has been variously estimated
as between £500 million and £1 billion a year,
which is many thousand of pounds for each arms export job. As
examples of the disproportionate support, UKTI DSO has 160 staff
working to promote arms sales whereas there are only 129 UKTI
staff working specifically allocated to all the other industrial
sectors put together. The remaining 2,300 UKTI staff are
available to support all industries, including military production.
No economic justification
7. Defence Equipment Minister Quentin Davies
MP questioned the idea that producing military equipment is the
way to stimulate the economy when he appeared before the Commons'
Defence Committee on 16 December 2008. He said that: "..
to use your money for maximum impact you need to spend it on goods
and services which are labour-intensive rather than capital intensive
in their manufacture so that the benefits flow through into pay
packets rather than into rewards for providers of capital—banks
and shareholders and so forth who would inevitably have a very
high propensity to save and a low propensity to consume. Ideally
you need these wages to flow through to people who are relatively
low-paid. This is not the case with defence; defence is capital-intensive
rather than labour-intensive." By a Government Minister's
own admission, supporting military exports does not appear to
be a recipe for helping the UK out of recession.
8. Furthermore, in common with many other
sectors of the economy, there is no longer any identifiable UK
arms industry. Military industry is internationalised with most
equipment containing components and sub-systems from a variety
of companies, which typically may have their headquarters in one
country, but subsidiaries in several others. Sales and employment,
too, are globalised with, for example, Thales and General Dynamics
being major suppliers to the UK Ministry of Defence, and BAE employing
more people in the US than it does in the UK.
9. UKTI addresses this lack of recognisably
UK businesses by saying that: "To qualify for UKTI trade
services the business should be able to demonstrate that it has
an active UK trading address. This includes both UK-based business
investing, or looking to invest, overseas and foreign-owned businesses
based in the UK. There is no policy with regard to foreign content,
we are looking at overall benefit to the UK economy." The
ECGD will support projects with up to 80% foreign content.
10. However, with the military export sector,
the benefit to overall economy does not exist. Even the Ministry
of Defence, in its 2005 Defence Industrial Strategy, admitted:
"Arguments for supporting defence exports in terms of wider
economic costs and benefits eg the balance of payments, are sometimes
also advanced. A group of independent and MoD economists (M Chalmers,
N Davies, K Hartley and C Wilkinson—The Economic Costs
and Benefits of UK Defence Exports. York University Centre
for Defence Economics, 2001) examined these, by considering the
implications of a 50% reduction in UK defence exports. They concluded
that the 'economic costs of reducing defence exports are relatively
small and largely one off…as a consequence the balance of
argument about defence exports should depend mainly on non-economic
considerations.'"
11. Military exports undoubtedly bring commercial
benefit to arms companies and their shareholders, but, to the
best of CAAT's knowledge, there is no evidence from economists
independent of the arms industry that suggests military exports
make are important to the UK economy.
EMPLOYMENT
12. Turning to employment, the 55,000 jobs
supported by arms exports account for 0.2% of the UK workforce
and less than 2% of manufacturing employment. A further 155,000 workers
are employed producing equipment for the UK armed forces, but
even the military industry total of 210,000 jobs makes up
less than 0.7% of the UK workforce and around 7% of manufacturing
jobs.
13. Since the beginning of the 1980's at
the height of the Cold War, numbers of employees in the sector
have dropped rapidly, levelling out over the past few years. There
is little reason to suppose that the long-term decline will not
continue, due to the capital-intensive nature of the industry
and outsourcing to countries with lower production costs.
14. The arms companies are, not unnaturally,
prone to exaggerate the number of jobs sustained by the arms industry.
In the run-up to the decision to stop the Serious Fraud Office
inquiry into BAE Systems arms deals with Saudi Arabia, figures
of up to 50,000 Eurofighter jobs under threat were appearing
in the press. However, a June 2006 report commissioned by
the Eurofighter PR and Communications Office said that the Saudi
Eurofighter deal would secure around 11,000 jobs throughout
the whole of Europe. Fewer than 5,000 of these jobs would
be located in the UK.
15. The sale of Eurofighters to Saudi Arabia
also illustrates another trend under which the buying country
insists that an assembly line is set up in that country. Two thirds
of the 72 Eurofighters are expected to be assembled in Saudi
Arabia leading to the creation of 10,000 skilled jobs there.
Similarly, 66 Hawk jets were sold to India, but 42 of
these are being manufactured under licence in India by HAL. The
logical extension of this is that HAL will produce Hawks for the
global market, and negotiations to this end have been reported.
16. A common misconception is that UK arms
industry jobs are primarily in areas of high unemployment but
the largest number of military industry jobs are in the low-unemployment
South West and South East. It is only after these that we come
to the North West, where there is a significant amount of BAE
employment. There are only a handful of areas that could be described
as having a residual dependency on arms employment. Of these,
only three sites—BAE Warton in Lancashire, BAE Brough in
East Yorkshire and AgustaWestland (owned by Finmeccanica of Italy)
in Yeovil—have significant export contracts. BAE Brough
already faces an uncertain future and there were 450 redundancies
in 2008.
17. Government support for arms exports
cannot, therefore, be seen an efficient way of boosting jobs in
the UK.
Preserving Yesterday's Industry
18. The disproportionate support given to
one industry is a historical legacy, exploited by those interested
in preserving the status quo. The "revolving door",
whereby politicians, military personnel and civil servants, move
into the arms industry or, sometimes, vice versa, as well as the
plethora of committees, for example, the National Defence Industries
Council, on which company executives sit alongside politicians
and senior civil servants give the arms industry a foothold within
government machinery.
19. In addition, there is the understandable
desire of trade unions and local authorities, as well as Members
of Parliament, to preserve the jobs which exist rather take a
risk on a more sustainable future.
20. A further factor is the emotional association
of military industry with the "defence" of the UK and
the security of its citizens. The international nature of the
arms industry, as described above, belies this. In fact, there
is a growing body of opinion that the arms companies distort the
UK's procurement priorities. For example, Lewis Page, who used
to be in the Navy, wrote "Lions, Donkeys and Dinosaurs"
on this theme in 2006, whilst a retired army officer wrote to
the Daily Telegraph on 19 September 2008 saying
that: "The reason we have a military is to protect the nation,
not to generate employment in the defence industry." He cited
the "white elephant Eurofighter".
New opportunities
21. Ending the support for military exports
would free up resources to help other sectors that might be more
efficient and innovative and likely to grow rather than decline.
It is not within CAAT's competence to explore these in detail.
However, an obvious example is the response to climate change,
widely acknowledged as the biggest threat to human security. A
key factor in addressing the threat is the rapid expansion of
renewable energy research and development and production, and
this requires public investment and skilled engineers. In 2007 UK
government-funded R&D for renewables was around £42 million,
compared to £2,598 million for arms (28% of all Government
R&D) and total military expenditure of £34,045 million.
There will have been some increase in R&D for renewables in
the intervening period, but it is still a drop in the ocean compared
with arms spending.
22. There is demand for funding. By way
of example, on 7 April 2009 the Financial Times reported
that the Confederation of British Industry wanted investment to
help the switch to a low-carbon economy. The same issue had an
article on calls by the science research councils calling for
£2 billion of additional money to invest in high-tech
start ups and prevent a brain drain to the United States
23. Arms industry workers have skills that
are needed to meet these new challenges. BAE likes to portray
itself as a major provider of high-tech jobs, but these jobs are
dependent on R&D funding from the tax-payer, if the money
changed sector it is likely the jobs would follow. Resources could
be targeted at those locations which might be disproportionately
affected during the changes, as clearly these areas would have
workers with good skills to undertake alternative engineering
projects.
24. Once the new industry has been established,
Government support, through UKTI and export credit provision,
can then be directed towards the promotion of its exports.
25. It is worth noting here, that there
is also some evidence that the application of science and technology
to an area to which many people have ethical objections may dissuade
some from studying science. The UK Graduate Careers Survey 2008,
as reported in The Times 9 April 2008, said that working
for the Ministry of Defence and arms companies topped the list
of employers rejected on moral grounds. Such people may well be
attracted to scientific or engineering careers if they are seen
as making a positive contribution to society.
Consistent policies across government
26. The prevailing policy of promoting military
exports has frequently undermined other policy objectives such
as ending conflict or support for human rights. It has left the
UK open to accusations of hypocrisy over issues of corruption,
which, in turn, has lead to questions about London's role as a
financial centre. Ending the support for military exports could
lead to more consistent Government policies.
27. It would also free up resources which
might not only help the UK out of recession, but could build a
sustainable economy for the future.
20 April 2009
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