Thursday, 21 October 2010

Why the Government was wrong to cut MoD defence spending and F35 orders from BAe systems

A letter from the workers at BAe systems to David Cameron and a sperate letter to Vince Cable highlighting the economic impacts, spelling out why the Government is wrong to cut defence spending and the devasting impact this will have.

It is clear to workers, to people I speak to in East Lancashire, to experts that this is the wrong policy. It is a devasting policy that will reduce Britains' industrial capacity and punish ordinary people with redundancy and home loss as a price of banking failure.

Letter to David Cameron & Letter to Vince Cable

Double click to enlarge

Double click to enlarge

Rt Hon Dr Vince Cable MP,
Secretary of State,
Dept for Business Innovation and Skills,

14 October, 2010

Dear Secretary of State,


I write as the elected chairman of the trades union consultative body for BAE Systems within the UK in respect of the above.

I recently wrote to you in regard to a letter to the Prime Minister on the matter of the impact of defence cuts, not just upon the workforce, but in regard to its wider impact upon defence, education and the economy. As I understand that you are involved in the SDSR from a business perspective, I would now like to bring to your attention the considerable contribution the defence industry makes to the UK economy, a contribution that could be seriously damaged by defence spending cuts.

The UK defence industry must be considered a success story. It employs some 300,000 people, many in highly skilled high value jobs and as a manufacturer, it is precisely the type of industry that David Cameron has stated is important to the UK. I list below some salient points (sourced from research conducted by Oxford Economics, Defence Matters and the A|D|S trade body):

· In 2009 the aerospace and defence sector added £12bn in value to the economy, with the average value-add per employee being £61,200, significantly above the automotive, construction and electronics sectors.

· Defence exports in 2009 from the UK based defence industry generated £7.2bn in export  revenue and in 2007 the UK was the leading defence equipment exporter in the world.

· Exports equate to 22% of defence turnover in the UK, more than banking and finance.

· The defence industry generates an increase in gross output of £227m for every £100m invested which increases Exchequer revenues by £11.5m. A resultant output multiplier of  2.3 ranks the industry above the median for other sectors.

· For every job created in the defence industry, 1.6 jobs are created elsewhere in the economy. An investment of £100m in the industry will create 1,885 jobs through the UK economy.

· Every year 1000 apprentices are taken on and trained by the defence industry, with many within small and medium sized enterprises (SMEs). Defence companies are also involved in promoting engineering as a career within schools.

· The defence workforce is highly skilled, with 39% holding NVQ level 4 or greater, similar to the banking and finance, telecoms, insurance and pension sectors.

· In research and development £3.3bn is invested annually by the defence industry. This is 14% of the national R and D spend each year.

As I stated in my letter to the Prime Minister, the success of the defence industry as an exporter  can be considered to be a subsidy for defence expenditure by the MoD. By being able to create export variants from equipment procured by the MoD, the resultant income to the Exchequer offsets the amount spent on defence procurement. We would hope that this has been recognised during the review.

We are also concerned that young people’s perception of careers in engineering and manufacturing will be adversely affected by the inevitable loss of jobs (and potential company closures, especially SMEs) that will result from defence cuts. I note that the minister for skills and lifelong learning, John Hayes MP, during a fringe meeting at the recent Conservative party conference, accepted that attitudes towards engineering had to shift so young people could see the opportunities of engineering careers. Large numbers of job losses within engineering will certainly not help in this regard.

I would, therefore, much appreciate it if you could ensure that the above has been given consideration during the closing phase of the SDSR and that you bring it to the attention of your colleagues as appropriate. In addition, I would like to hear from you in regard to the Government’s future plans for mitigating the effects of defence cuts upon the defence industry and the impact upon jobs.

I look forward to hearing from you.

Yours sincerely,
Roy Cartwright,
For and On Behalf of the BAE Systems TU Delegates Conference