UK Defence Futures

(FV 107 / Scimitar / CVR(T) Mk. 2 in Afghanistan: the first of six replacement studies started in the early '80s.

Several hundred million pounds later, the UK has actually delivered um, no vehicles)

Few commentators on UK Defence are as well informed - or sadly, less well known outside of the narrow confines of defence spotterdom - than Francis Tusa, editor of the Defence Analysis newsletter. So it was with great interest that I heard that Mr Tusa had a programme on Defence Procurement on BBC Radio 4 - well worth a listen.

Much on "The Conspiracy of Optimism"; the fact is that the UK has been trying to get a quart into a pint pot, mostly by underestimating the costs of the equipment at the beginning. Essentially, very few equipment programmes are ever cancelled, and as a result if you can get it into the MoD Equipment Programme (EP) then the cost rises will simply be absorbed at the end of the process. (NB to the defence industrialists whining about everything - BAE Systems, that's you amongst others - is just ridiculous: the MoD is not there as a industrial policy - it is there to deliver combat effect in support of foreign policy goals at a time and place of the Government's choosing.)

 (Lots of bits. From lots of Constituencies. And not yet assembled....)

Except that costs are generally not absorbed or mitigated, as the costs are allowed to rise and the stock MoD answer is to S L O W things down. Right down. Very S L O W L Y indeed (but remember, nothing gets cancelled, right?) This drives the costs through the roof, but makes it affordable in the next 12 months. How much more expensive? Well, effectively doubling the cost of the Carrier programme for instance, leaving the UK in the absurd position of having one and a bit aircraft carriers with no actual aircraft to fly off them. Well done.  

So, Bernard Gray (the new broom at Defence Equipment and Support (DE&S)) wants new skills and expertise into the procurement game. Good. But the biggest challenge is surely that irrespective of the MoD getting it's house in order (which is a good idea, but is unlikely in the short-term - and the cultural change required is enormous), it is just as much about the UK government deciding what it wants to achieve internationally - and then paying for it.

Very, very, difficult choices in 2012. Happy New Year, MoD.

An outbreak of common sense?

("Hi, I'm back. Can we all be friends again? Hello? Angela? Nicky? Hello?")

A very interesting article from The Sun. As many of you know, The Sun isn't my natural paper of choice, but if the report is true that David Cameron is seriously looking at what they hilariously describe as a "EU-turn" (oh what witty banter they come up with in Wapping!), then thank goodness for that. 

It won't immediately overcome the impact of the non-veto at the Council, and as The Sun correctly notes, 

"If the PM did sign a new treaty it would spark fury from Tory Eurosceptic MPs". 

Indeed, because as I argued at the time, unless Cameron wants to put the UK irreparably on the exit ramp from the EU,  this confrontation needs to happen. It also lays bare the fact that that this row is now (and probably always was) largely about internal Tory party party management, not about the substance of the new institutional arrangements - which is doubly damaging for Cameron who persistently claimed (in the face of the evidence) that he was "doing what was right for Britain".

So, let's hope that the PM can find a face saving route to climb down over Christmas and face down the Eurosceptics / Europhobes in his own backbenches. The sad truth is that if he doesn't do it now, then he'll either be in hock to them for the rest of his time in charge (shades of John Major and the "Maastricht Rebels") or he'll have to face them down later at much higher political cost. Unless, of course, he wants to leave the EU (which I'm sure he doesn't). 

Attaboy, Dave! Up and at them, and all of that.

Eurodebacle, continued.

(One view. Helpfully unencumbered by any actual facts, of course.)

In haste - an interesting take that I'd missed from the BBC's Mark Urban. The main point is that UK seems to have had a negotiation fiasco - the idea of bouncing the rest of the EU into something unrelated to saving the euro at a day's notice was always going to be difficult, and in fact it was a shambles. Fortunately, the UK is walking back on this at this point.

A week on from the Eurodebacle

(Ah, it was all so much easier back then...)

Ok, so last weekend I was very annoyed about the "Ready, Fire, Aim" approach to EU negotiation by David Cameron; and it didn't get any better by Monday. According to the FT, the cunning plan seems to have been the bright idea of Sir Jon Cunliffe, the ex-Treasury incoming head of UKREP. At the time, I was musing about how this could be unwound, by getting Cameron to amend his current course by approximately 179 degrees. After the PM's Commons statement on Monday, someone (I'm assuming Nick Clegg) has been on the phone to the rest of Europe trying to patch things up.

And whoever this someone is, they've had some early success. The good news is that Britain has been offered "observer" status at the EU-26 talks, and that Germany's Chancellor Merkel's comments that she wants the UK in the EU. This, along with the realization that the one thing Cameron has failed to actually protect was the financial services sector (because most of the financial regulation is still under QMV at 27) - ironic, given this was the rationale for the veto-that-wasn't last week - means that the 179 degree course correction is on, slowly.

What the Tory Eurosceptics/phobes like Bill Cash MP will make of this is not likely to be pleasant reading in No. 10. But in defending the national interest, Cameron will ultimately have to face down his own right wing - which could be great fun to watch, but will continue to irritate the Coalition.

We shall see.

European Council Debacle Part Deux

(Yep, quite a lot to ponder there, Dave...)

48 hours on, does David Cameron's position look any better / more sensible / vaugely explicable?

In a word, no.

(In fact, in several words, NO, absolutely NOT.)

It's increasingly clear that this is basically a screw up, albeit on a previously unknown scale. There's coverage everywhere, but Will Hutton's piece is excellent, and it's hard to see how things are going to get any better soon. I can only hope against hope that the financial services sector make it crystal clear that this isn't remotely helpful to them, and that the worst possible position is for the UK not to be in the room making sensible suggestions about evidence-based policy making in this area, and that as a result, the UK needs to swallow it's pride and get back in there.

A difficult U-turn. But an essential one.

And no, I don't see the Coalition breaking up yet. But a bad weekend for that, too.

Cameron? Really? Why didn't Clegg stop him?

 

(Dave: Fail. Epic Fail.)

I don't normally blog here on European issues, as it's a very specialist element of international law. However, PM Cameron's decision not to participate with the new EU Treaty to help save the euro at 4am on Friday means that I'll break with this rule. It's basically out of a real sense of confusion and disgust that I'm scribbling these lines.

First, Britain hasn't "vetoed" anything. Britain is simply excluded from the Treaty the 26 other states of the EU will conclude, and therefore Britain will have no say (and less influence) on the outcome. Given that this could include single market decisions and financial services regulation - that Cameron was claiming to be protecting - this could rapidly get us to the position that the decisions he was seeking to influence get made without the UK's input, as they're subject to codecision under QMV at 27 but if 26 of the 27 states have already decided, then it's a done deal. UK influence = Zero.

Second, as a result of this, there is no reason for international banks wanting to operate in Europe who can relocate to Frankfurt or Paris not to do so, as Britain's influence in financial services regulation in Europe is now effectively zero - and will be for a decade or more. This will be a slow process, but to the extent to which influence on the regulatory regime helps decide where you base your activities, then this is inevitable.

Third, the outcome of the ECJ case on non-discrimination in the eurozone that the UK has launched will not be known for several years. In the absence of provisional measures, there could be de jure bars as well as the de facto barriers that have existed for those outside the single currency since it's inception. Not good for the single market, and not good for those outside the euro.

(Britain's future EU role?)

Fourth, there is no clarity on the domestic political front that this will silence the Tory "Eurosceptics" - in reality Europhobes - and avoid their demands for a Referendum on the UK's relationship to the rest of the EU. This is a manifestation of Cameron's weakness inside the Tory party - remember he was the guy who couldn't defeat Gordon Brown in the midst of an economic debacle of his opponents making. In essence, any such Referendum would be the In/Out Referendum that UKIP wants and which many pro-Europeans fear, as they expect to lose it, leading to the British withdrawal from the EU. This would be about the most short-sighted economic decision imaginable, but the pro-Europeans bear a heavy share of responsibility - including Blair - for not making the case to Britons for why the EU matters to them - and in their hip pocket.

Fifth, the Europhobes / UKIPers keep banging on about Britain withdrawing from the EU and then having a free-trade agreement with the EU as the EEA states (Iceland, Liechtenstein, Norway) and Switzerland (under different rules) do. Unfortunately, those advocating this position seem to miss the point that the reason that the EEA states get to access the single market is that they have to apply the acquis in all areas except agriculture and fisheries, and have no way of influencing the rules. Given that agriculture and fisheries in the UK makes up less than 2% of the economy, even if this deal were possible, it's a completely absurd notion, as you want to be having a say in making the rules. You do save the net costs of the EU budget, however - say £15bn p.a (less than half the £44bn the UK will spend on debt interest).

Sixth, if EEA Plus is a beguiling chimera, then Cameron has achieved something even worse: paying the net budgetary cost of full EU membership whilst having very little more clout than the other EEA states - the UK has a veto in those areas that the Lisbon Treaty requires unanimity at 27 for, but if the other 26 are going to agree amongst themselves, and a decision doesn't directly contradict existing legislation at EU-27 level, then the UK's vetoes are meaningless. Legal challenges will keep the ECJ happily busy, though.

Seventh, two things about the Council that seem to have been missed in the noise. First, Croatia will join in 2013 - well done Croatia, a small piece of good news. But bad news for the UK as new members will be expected to join the group of 26 - and indeed why would any new members want to join the Brits in second-class EU membership? Second, the Council meeting was designed to save the euro - and it hasn't provided the mechanisms to do so.

Finally, what the hell was Nick Clegg - a former European Commission bureaucrat, former Member of the European Parliament, and leader of our beloved Liberal Democrats, Britain's most pro-European party - doing? Clegg must have been aware of all of the above, and yet he endorsed Cameron's approach. Remarkable, (and remarkably stupid) given that he recognizes the damage that a two-speed Europe poses to the UK.  

So what do we make of this? Firstly, it's too early to make definitive predictions... however, here we go:

 - The UK shouldn't have walked out - you stay and negotiate until there is a text on the table - which there doesn't appear to have been;

- The coalition will survive as the LibDems face electoral oblivion if they go to the polls now, so coalition politics will struggle on to 2015 (when the LibDems may still face electoral oblivion);

- The new Treaty at 26 is due to be finished by March 2012 - remarkably quickly; but they also need to get it approved, and this should involve referenda in the Netherlands and Ireland that aren't obviously straightforward, so the Treaty may or may not even happen;

- If the international financial services sector based in London make clear to the British Government that they're likely to decamp to the Eurozone then it could be time for the most epic (and humiliating) of U-turns for the UK to rejoin the Treaty at 26 (naturally on much worse terms than if the UK had stayed in in the first place).

A triumph all round then. Let's hope the Europhobes and UKIPers enjoy their "triumph"; schadenfreude-induced-by-payback will suck.