Typhoon deal in Treasury limbo
Monday, April 20, 2009
A compromise to divide the final tranche of Eurofighters into two orders was thrown into chaos over the weekend after the Treasury decided to re-examine the MoD's proposal and request for funds.
After months of discussions, Germany, Britain, Spain and Italy reached an agreement with EADS to split the final order into two parts. Britain would order 40 Typhoons in the first order and 48 in the second. From these orders 72 of the aircraft would be sold to Saudi Arabia, leaving Britain with just 16 aircraft. All of the aircraft Britain is keeping would be ordered in the first tranche, leaving the MoD in need of immediate money.
The plan to divide the order can only go through if the Treasury authorises approximately £1.4bn for the purchase of the 16 aircraft. But Treasury officials, who are under immense pressure to make cuts across the government, are taking another look at the order
according to the Financial Times.
Defence Secretary John Hutton has become involved in recent days, pleading with the Treasury for the funds, highlighting the number of jobs at stake and the potential for the entire deal with EADS to collapse.
There is much at stake for all parties involved in the Eurofighter deal. The buyers all want a split order for the planes in order to produce savings in their defence budgets. A Treasury veto would effectively kill the agreement with EADS and could lead to the company demanding that all of the planes be bought in one order.
Alternatively the four countries could simply decide not to buy the planes at all if the Treasury orders a rethink on the purchase. This would produce severe financial consequences for EADS and BAE Systems and could lead to job losses.
The MoD would only admit that discussion continue with the Treasury but that "good progress" was being made.