Westland – 30 years of lessons

  • Heseltine image“Westland needs more Government interference in its affairs like it needs a hole in the head.” Paddy Ashdown never minced his words, as this example from a letter he sent to the then Prime Minister Margaret Thatcher on January 3rd 1985 attests. It was the start of the Westland affair of 1985-86 and Government documents recently released under the 30-year rule and available in the national archives have shone a fascinating light on the crisis, which still echoes today.

The rumpus concerned the future of Britain’s last remaining helicopter manufacturer, which was in deep financial trouble and subject to takeover bids by two consortia: one American, the other European-led. It eventually claimed the scalps of two Cabinet Ministers and Mrs Thatcher genuinely feared for her premiership at the time.

In reality the affair was a smokescreen for the first serious challenge to her premiership. Michael Heseltine (pictured), the then Defence Secretary, had picked the fight but eventually resigned after storming out of a Cabinet meeting on January 9th 1986. He favoured a European bail-out of the company, fearing an American partnership would “mean the transfer of technological secrets and research capability to the US, leaving Westland as a mere metal basher”.

The problem for Heseltine though, was that the American bid by Sikorsky was “much more attractive than the rickety, non-cohesive European consortium of loss-makers” as an article in The Times on Saturday January 4th 1986 put it (under the provocative headline ‘Bovver boy’s hover ploy’).

The central issue, which has dogged military and political bigwigs since the second world war (and continues to do so today) was neatly summed up in a parliamentary question by Austin Mitchell, MP for Great Grimsby, to Mrs Thatcher on January 13th  1986: “What is the policy of Her Majesty’s Government towards dependence on supplies of arms and war material from the United States? Replace ‘the United States’ with ‘any country outside the UK’ and you get the nub of the problem.

The thorny question of defence sovereignty is a hardy perennial that has entangled many a politician. What value should a nation place on strategic independence? Should a country aim for self-sufficiency, so that it is not dependent on fair relations with international partners in the event of war? It’s a poor strategy to build fighter planes if the wings come from a potential adversary. But is it prohibitively expensive to maintain a domestic defence industry, especially if you want the most advanced equipment? (And, believe me, it’s no fun stepping into the two-way rifle range with kit made by the lowest bidder.)

A COTS strategy (Commercial Off The Shelf) may be cheaper, as you can just browse a military version of the Argos catalogue and not have to invest in all the pesky and expensive research and development costs. But it is unlikely a country offering a COTS option will be selling the top-notch stuff, which they will keep for themselves (you wouldn’t give potential enemies such an easy ride). So, you buy in the sure knowledge that even the eye-wateringly expensive kit you have just bought is second-rate.

And what of the political considerations of the wider industrial and employment factors? Jobs equals votes; so a national defence industry is attractive to politicians, even if the military top brass don’t get the best available kit on the international market. The political tempo focuses on the short-term with elections every five years (which leans towards supporting local businesses), whereas the defence procurement tempo is generally long-term (which needs investment over many years; an unappetising prospect for the Treasury). But, as Ron Smith, Professor of Applied Economics at Birkbeck University of London, says, once the defence budget falls below 5% of GDP there is unlikely to be a macro economic effect for the country anyway.

At one extreme is the position Jeremy Corbyn recently espoused for the replacement of Trident, Britain’s fleet of four nuclear-armed submarines. He suggested we should build the subs but not arm them. This would effectively turn that slice of the defence budget into a form of welfare: pointless subs but lots of jobs in Barrow-in-Furness, a sort of Keynesian approach to defence procurement. (I visited Barrow-in-Furness once to see the construction of the next generation of hunter-killer subs by one of the last great domestic defence manufacturers the UK has. I took the lift to the fourth floor in the construction hangar and when the doors opened I was still only level with the base of HMS Ambush’s conning tower – these things are BIG!)

When it comes to defence procurement then, it’s difficult unequivocally to identify the national self-interest. In 1986 Westland found itself in the middle of these competing issues. “Ministers {Heseltine and Brittan} should be put back in the Cabinet and the lid firmly shut,” thundered Paddy Ashdown, “instead of winding [Westland’s] arms half way up their backs with threats.”

Ron Smith warns against the ‘Winner’s Curse’, whereby a company wins a contract with a low bid but then has to deliver the goods on budget, and the ‘conspiracy of optimism’ whereby the government really wants to believe they can. One way to avoid it is to remain close, very close, to an ally that will give you preferential access to state of the art kit.

And that seems to be what the UK has done with the US. On the first day of the 2016 Farnborough International Air Show on July 11th, the government signed two key deals with the US worth about $6 billion. Nine P-8 Poseidon anti-submarine warfare aircraft and 50 AH-64E Apache helicopters will be bought direct from the US manufacturer Boeing. Westland – now, through various take-overs, called Leonardo – won’t see a penny. It is effectively a COTS purchase, but for the top-notch stuff rather than just a good deal on last year’s ski gear.

A former military helicopter pilot who was intimately involved in the programme to buy the first Apaches for the UK – the AH-64D model ten years ago – is glad Westland/Leonardo didn’t get the upgrade contract. He told me Westland was never good value for money and their service poor. He regularly had to speak directly to Boeing or Lockheed Martin over issues with weapons and radar and felt Westland concentrated mainly on their relationship with the UK government, rather than actually making the thing work.

Lewis Page was equally scathing. In his book Lions, Donkeys and Dinosaurs he railed against the value to Britain of allowing Westland to have the AH-64D contract. He took the 34,000 man-years of work delivered to the British population and assumed a human working life of 45 years. By that calculation he reckons 755 people were saved from the dole. “We could have bought the helos direct from Boeing,” he says, “then simply given 755 jobless people a million pounds each…and still saved ourselves a billion.” So, not a fan then.

The P-8 anti-submarine warfare aircraft were bought to fill the capability gap created when the MoD scrapped the Nimrod MRA4 programme after the 2010 Strategic Defence and Security Review. This was judged a bold decision at the time and suggested a more realistic, breath-of-fresh-air attitude to military procurement could be expected from David Cameron’s government.

Put simplistically, anti-submarine warfare involves being able to see stuff under the water. It was the perfect capability to use in the search for the missing Malaysian aircraft MH370 that disappeared in the Southern Ocean in 2014 (and brilliantly reported by an underpaid hack at The Economist here). I’m told Mr Cameron was outraged that the press footage of the airfield in Perth, Western Australia, where the international search effort was being coordinated, showed no aircraft with a union flag on the tail. He apparently had a sudden change of heart about how necessary such planes were and quite how ‘bold’ military procurement decisions should be in the future.

Things have moved on a bit since Paddy Ashdown warned Westland was being treated like a “political football”. Even if we set aside the idea that the whole spat was a leadership challenge from Michael Heseltine (who, like Boris Johnson and Michael Gove, never believed the political maxim that he who wields the knife never wears the crown) the days of the UK affording a sovereign defence industry had already passed. Westland accepted the rescue bid from Sikorsky, briefly returned to profitability and was then sold to the Italian firm Agusta, later renamed Leonardo. It has survived and still picks up a bit of helicopter-related work, but the days of manufacturing, even under licence, seem over. A pyrrhic victory for Mr Heseltine perhaps?

By going direct to Boeing for the new Apaches and the P-8s, perhaps the government has signaled that it has learned different lessons from these tales of defence procurement: that the UK is never going to be a big defence industrial player any more and the MoD budget is an expensive way to shore up jobs in the industry. Maybe the boldest decision is to accept that and just pay the price the market demands for the stuff, whilst staying very close to your allies for preferential access to the best kit. But has the UK compromised too much in recent years to stay close to the US? Now that’s another subject…

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