Minister seeks £1bn for Eurofighters

[tigershark]

Minister seeks £1bn for Eurofighters
By Gerrit Wiesmann in Frankfurt and Sylvia Pfeifer in London

Published: April 17 2009 22:02 | Last updated: April 17 2009 22:17

John Hutton, the defence secretary, is in urgent talks with the Treasury to secure more than £1bn to enable the UK to pay for several Eurofighter Typhoon jets it has ordered as part of its commitment to the four-nation programme.

The talks threaten to hold up an agreement between the partner nations – the UK, Germany, Spain and Italy – on the third production run of the aircraft.

Government officials in Germany fear failure to sign an agreement soon could force the manufacturers – including the UK’s BAE Systems, EADS, the Franco-German defence group, and Italy’s Finmeccanica – to slow the roll-out, potentially affecting jobs.

The nations have been negotiating for months on the third and final tranche of the programme in the face of budgetary pressures. However, German government officials said the Ministry of Defence had so far failed to get Treasury support for a proposal whereby the nations would split the 236-aircraft order into two batches.

The officials said the MoD had agreed to buy 40 of its initial order of 88 fighters if it had Treasury backing.

“The MoD wanted to give us the green light in the days after Easter, but now it is stalling,” said one official.

The agreement, negotiated by procurement chiefs at the start of April, was meant to bring to an end months of wrangling between the nations about the UK’s wish to reduce its order without paying penalties. The proposal to split the third tranche into two in effect postpones that thorny issue for another two years.

    ‘The MoD wanted to give us the green light in the days after Easter, but now it is stalling’
    German government official

In a notable concession, the three other nations have also agreed to let the UK count part of an earlier export order to Saudi Arabia towards its quota, thereby cutting down the number it needs to pay for now from 40 to 16 jets.

But with each jet costing about €100m (£88m, $130m), that still leaves the MoD facing a bill of more than €1.6bn. Another export deal with Oman could help ease the burden but is unlikely in the near term.

The request for funds from the MoD comes at a difficult time for the Treasury, which is preparing for next week’s Budget. Although the funds are expected to come out of the MoD’s core budget for 2008-09, the department has been struggling with an estimated deficit of £1.5bn and it requires Treasury approval to release the funds.

MoD insiders on Friday confirmed talks with the Treasury were ongoing. “The Treasury has put its foot on the brake, saying it wants to take another look at it,” said one insider.

The Eurofighter consortium claims 400 companies and 100,000 jobs profit from the project. German officials are so concerned they are considering asking Angela Merkel, the chancellor, to contact Gordon Brown, the UK prime minister.

The MoD said “good progress” was being made but added that “further discussion is required before nations are able to make an announcement on the way ahead”.

Source
http://www.ft.com/cms/s/0/cb295874-2b74-11de-b806-00144feabdc0.html?nclick_check=1