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News analysis Counting the cost of the UKs next nuclear deterrent

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23 March 2007

It wasn't quite a throwback to the Cold War era of rowdy Commons debates and campaigners chained to the gates of Greenham Common. But last week's rebellion over the UK's nuclear arsenal was still sizeable. It also drew a major parallel with the past: ministers, officials and the public have little idea how much the controversial nuclear deterrent will cost.

Prime Minister Tony Blair survived the biggest backbench rejection of government policy since the decision to go to war in Iraq and suffered mere egg on his face. His proposal to replace the Trident missile system beyond 2024 was saved by Conservative support on March 14.

But Public Finance understands that the 87-strong Labour rebellion could have been bigger had the spin around costs been better assessed.

Following a debate that led one minister to resign and 15 former ministers – including ex-home secretary Charles Clarke – to reject Blair's policy, one senior rebel said: 'Several floating voters in the Labour camp considered opposing the project but concluded that a £20bn top-end cost wasn't significant for a 30-year deterrent.'

Well, how does £91bn sound? Because that might be a more realistic estimate of the bill taxpayers will foot for a new submarine-based nuclear ballistic missile system – one that some experts believe is a white elephant.

What many people have failed to realise is that there are significant costs in addition to the £20bn procurement bill. Ministers have hidden them away as part of the Ministry of Defence's ongoing capital and revenue budget commitments – tying the department's and the Treasury's hands until at least 2050. And all this comes during a period when politicians, geo-political strategists and security experts accept that the threats to Britain's security, and its economic and political interests are mostly unknown.

The government has talked of its preference for diplomatic solutions to potential threats. Foreign Secretary Margaret Beckett said last October: 'The greatest security threat we face as a global community won't be met with guns and tanks – it will be solved by investment in… soft power: politics and diplomacy must work.'

Two months later, Defence Secretary Des Browne's white paper revealed Blair's preference for retaining the UK's nuclear capability. 'In this government, we are committed to maintaining a minimum deterrent, and one credible to any potential aggressor,' he told MPs.

But negotiations on renewing the 40-year-old international non-proliferation treaty begin in May and there will be questions over Britain's rearmament plan. Former UN secretary general Kofi Annan warned in November: 'They should not imagine that this will be compatible with the non-proliferation treaty. Everyone will see it for what it is: a euphemism for nuclear rearmament.'

Browne's white paper, The future of the UK's strategic nuclear deterrent, revealed the £20bn figure for procuring the system broke down thus: £11bn–£14bn for the submarines that carry the weapons, £2bn–£3bn to buy the missiles and £2bn–£3bn for support infrastructure.

However, the Commons' defence select committee has questioned the MoD's ability to control even those costs. Committee member Kevan Jones says he fears that Browne has 'not built into these costs a possible contingency for another Astute-type fiasco'.

The Astute submarine project blighted the MoD's last major foray into nuclear procurement (the vessel is both nuclear powered and carries the controversial warheads). By the time it is launched later this year, a decade after it was devised, Astute will be four and a half years late and £1bn over budget.

When confronted with the committee's concerns, Browne acknowledged that while his estimates were 'the best that we can give… they will be refined by the process at the concept and assessment phase'. Expect revisions when contracting begins between 2012 and 2014.

But procurement cost increases are by no means the biggest financial conundrum facing the department. Browne admits that the operating costs for a Trident replacement would eat up 4%–6% of the MoD's annual resource budget – anywhere between £1.5bn to £2.2bn, depending on the department's settlements beyond this year's Comprehensive Spending Review.

According to one senior Whitehall source, 4%–6% of the resource budget also represents a 'significant hike' in the MoD's acknowledged cost of retaining a nuclear arsenal. Environmental lobby group Greenpeace says past governments 'misled the public about the true in-service cost of Britain's nuclear bomb' by averaging annual costs at 2%–3%.

An MoD spokesman this week confirmed that the replacement for Trident's would operate for at least 26 years from 2024. That equates to an extra £40bn–£57bn for maintenance costs alone, unless international non-proliferation or disarmament agreements persuade the UK to soften its nuclear stance before 2050.

Greenpeace, however, says it is more likely that the system would operate for 30 years – pushing the potential 'through-life' cost as high as £66bn. The lobby group issued a report on March 6 that puts the full cost of Trident's replacement as at least £76bn. 'That is the equivalent of over £4,500 per British family, or approximately 40% of the MoD's conventional weapons purchases every year,' it states. Quietly, Browne admits calculating costs in this way is 'perfectly legitimate'.

In addition, the government has acknowledged there are other costs involved. Despite claims that Trident's replacement was unnecessary because the current system provides a nuclear capability until 2019, the replacement programme is officially behind schedule. The MoD claims it will take 17 years to plan, procure and test the system, so 2024 is the earliest operational date. To ensure the UK has a nuclear deterrent continuously, the working life of the current submarine fleet must be extended by five years to 30 years.

Tom McKane, director general of strategic requirements at the MoD, acknowledges that patching up aged submarines will prove costly. 'The work that we have done shows that we are probably talking, in round terms, of hundreds of millions for the five years for the four boats,' he says.

More importantly, timely delivery of the replacement system is crucial: McKane warns that extending the current fleet's life beyond 2024 would mean starting to talk 'in terms of billions'.

Other costs include the full price for new equipment and upgrades at the MoD's Aldermaston atomic weapons base, put at more than £1bn. Britain's unpopular reliance on US technology could also force up the bill: the MoD rents and uses US D5 missiles, which will be retired in 2042, forcing the MoD to replace its stock.

These additional costs, therefore, bring us to a total of £65bn–£91bn for the entire project.

Clearly, the cost to taxpayers is far higher than politicians or officials have acknowledged. For Margaret Thatcher's miscalculated Trident project, read Blair's replacement programme. The world has changed; yet some things remain.

How the estimated Trident costs break down

New submarines £11bn—£14bn
New missiles £2bn—£3bn
New Infrastructure £2bn—£3bn
Total procurement costs £15bn—£20bn
In-service costs
(30 years at 4%–6% of MoD budget) £45bn—£66bn
Total 'new system' costs £60bn—£86bn
Other related costs
Extension of current missile life £250m
Extension of current submarines' life £200m+
Decommissioning current subs £1.75bn
Upgrading Aldermaston £1bn+
Additional missile costs after 2042 £1.5bn
Total potential costs £64.7bn—£90.7bn
Sources: Ministry of Defence, Hansard, Greenpeace

PFmar2007

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