MP questions the economic sense of ditching Lynx helicopters
Former Treasury chief David Laws has said it would be "economic lunacy" to scrap a military helicopter contract in the Westcountry after it emerged £560 million of taxpayers' money has already been spent on it.
As part of a Government spending review to claw back hundreds of millions of pounds, ministers are considering ditching the entire fleet of Lynx Wildcats under construction at AgustaWestland in Yeovil, Somerset.
Mr Laws, Liberal Democrat MP for Yeovil, and formerly the man leading the Government's austerity drive, has sounded his disquiet after figures laid bare the costs of the £1.4 billion project to date.
A written answer to a parliamentary question showed that about one-third of the total cost of the Lynx Wildcat contract has already been paid out.
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Some £560m of Ministry of Defence cash has been spent on design and manufacture of the helicopters, which were initially known as FutureLynx aircraft.
AgustaWestland, which employs 4,000 people at its Yeovil factory and indirectly sustains thousands more jobs in the Westcountry, has the deal to build a fleet of 62 helicopters in Somerset.
Mr Laws, who was Treasury chief secretary until allegations over rent payments to his partner forced his resignation, said: "This contract is incredibly important for the capability of the Armed Forces as well as being important to the economy of the South West.
"The parliamentary answer shows that a lot of the costs of the contract have already been met and it would be economic lunacy to even be thinking about canceling or reducing the scale of the contract at the present time."
Dropping the Lynx Wildcats, an idea proposed in a confidential internal MoD memo, is seen as a quick way for the ministry to get towards a target of departmental cuts of up to 20 per cent.
At an estimated £28m per aircraft, they have been dubbed Fat Cats. But military chiefs are thought to be excited by their capacity to roll and loop in the air.
Due to start coming into service in 2014, the helicopters will replace the ageing fleet of Army and Navy Lynx aircraft.
Ditching a big ticket order is given credence by Defence Secretary Liam Fox announcing in a keynote speech that he is set against "salami slicing" – meaning cuts evenly across the board.
But the Treasury will be wary of pulling down the shutters on the AgustaWestland contract because of the eye-watering compensation costs associated with not honouring deals.
Mr Laws' intervention, which comes as the Lib Dem party conference starts in Liverpool today, is given added weight by his time in the Treasury – even though he is thought to have sat out of items involving Lynx Wildcats.
Armed Forces Minister Nick Harvey, Lib Dem MP for North Devon, has shown his reluctance to continue the MoD's commitment to helicopters. An order for 22 Chinooks to serve principally in Afghanistan – and built partly in Yeovil – is "in the melting pot".
All defence contracts are subject to both a spending and a strategic review – both expected in October.
Infamously, the Yeovil plant formed the backdrop of a political fall-out in the 1980s.
Then known as just Westland, Defence Secretary Michael Heseltine resigned from the Cabinet after a row with Prime Minister Margaret Thatcher over their views on the future of the company.
In the parliamentary question, Gemma Doyle, Labour MP for West Dunbartonshire, asked how much the MoD has "spent on the Future Lynx/Wildcat project; and to what expenditure on the project it is contractually committed".
Defence Minister Peter Luff replied: "As at August 31, 2010, the contracted value of the Lynx Wildcat design and manufacture contract and supporting contracts is some £1.4bn, of which about £560m has been spent to date."
Last week, it also emerged that contracts worth about £1.25bn have been awarded for building two aircraft carriers – even though they too could be abandoned, according to reports. The £5bn project to build HMS Queen Elizabeth and HMS Prince of Wales has, in part, benefited Devonport and Appledore dockyards in Devon, even though the lion's share of the work has been carried out on the Clyde.