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ORAC 9th Jul 2007 00:35

Treasury to Close Defence Sales Organisation
Grauniad: Treasury plans to shut arms sales department

The Treasury is planning to disband the government's controversial arms sales department, the Guardian can disclose. The 450-strong defence export services organisation (Deso), based near Oxford Street in London, has long been the target of anti-corruption campaigners and opponents of the arms trade.

The former Treasury cabinet minister Stephen Timms launched proposals earlier this year to close down the secretive unit on the grounds that it subsidises profitable weapons giants such as BAE, Britain's biggest arms firm. According to Westminster sources, the Treasury's industrial productivity section argued that the taxpayer should not continue to subsidise an "anachronistic" department which had gained too much influence within Whitehall.

Leaked documents seen by the Guardian show that the review was ordered in March by Mr Timms before he left the department. He was replaced last month as chief secretary to the Treasury by Andy Burnham, in Gordon Brown's new prime ministerial appointments. Des Browne, the defence secretary, was told by Mr Timms before his departure that "he was not convinced of Deso's justification".

Deso, set up in 1966 when the arms industry was largely state-owned and was mainly concerned with selling off surplus equipment, spends £15m a year directly on helping British arms firms to sell equipment abroad. It also lobbies within Whitehall for export licences for sales to sometimes controversial regimes. Opponents say no other British industry is supported by such a large government-funded machine and that Deso, which is always headed by an arms company executive, relentlessly promotes the industry's interests within the government.

News of the Treasury initiative comes at an awkward time for Deso, which is accused of approving £1bn payments to Prince Bandar of Saudi Arabia from BAE. Deso runs the Al Yamamah arms deal for Saudi Arabia in return for a 2% commission. The Saudi transactions are now being investigated by the US justice department after Tony Blair ordered a British police inquiry to be closed down on alleged grounds of "national security".

Mr Timms approved the Treasury initiative as part of the comprehensive review of spending across Whitehall which is due to be completed in the autumn, in a climate of falling tax revenues. He was "keen" that it was pursued urgently.

The British arms industry sells around £5bn of equipment a year to foreign governments with the help of Deso, which organises arms fairs and marketing campaigns. The firms pay discounted fees for these services, but Treasury officials question why the companies cannot do this themselves or pay the full rate.

The Treasury disputes the claim that Deso-backed arms exports reduce the cost of equipment bought by UK forces. It says there is no evidence of this. On the contrary, Britain bought the over-priced Hawk trainer jet from BAE purely to help the firm's exports, when "an Italian equivalent would [have been] vastly cheaper, more capable and easier to maintain".

The Treasury analyses point out that the reputation of the British government is damaged by "promoting arms exports to countries with severe developmental shortcomings and/or human rights concerns (such as China, Colombia, India, Indonesia, Pakistan and Saudi Arabia".

The industry argues that exports are vital if Britain wants to retain the capacity to build its own weapons.

Interest at the Treasury in curbing Deso's role was first stimulated by a recent economic report from the British American Security Information Council, which attacked the financial rationale behind special treatment for the arms firms. Ian Davis, the thinktank's director, said: "The undue influence of Deso within the MoD gives the impression that securing contracts for the defence industry is more important than enhancing the fighting effectiveness of Britain's armed forces. It is time to end the cosy and corrupting relationship between public servants and private arms manufacturers."

GOLF_BRAVO_ZULU 9th Jul 2007 08:04

Interesting that it is always the Guardian that follows these witch hunts with such palpable glee,

tucumseh 9th Jul 2007 08:28

My personal experience of DESO is that it was staffed by honourable people.

As the article says, the original purpose was to sell off surpluses from the MoD inventory. I imagine most of our crown jewels have been sold off or scrapped by now (look at eBay!) and much of the rest is so antiquated or worn out that few would want it. I reckon they've just come to the natural end of life.

Inspector Dreyfuss 9th Jul 2007 08:30

Indeed, The Guardian has been campaigning against the Defence Export Services Organisation for some time. The subject organisation is not exactly secret - web link attached: http://www.deso.mod.uk/

tornadoken 9th Jul 2007 12:44

Targetting Merchants of Death has a long, even courageous pedigree. Go to 1929-34 League of Nations' work, and a UK Royal Commission, to outlaw the Private Manufacture of Arms, which, it was thought, provoke, not deter war: that is taught today as prime cause of WW1. Prominent were Philip Noel-Baker, who won the Nobel Peace Prize, and R.Stafford Cripps who in 1936 urged Eastleigh Spitfire workers to down tools. But while good guys did Jaw, Jaw, bad guys did gird for War, War.

When we had no enemy in 1947, Attlee's Govt. (Philip N-B as junior War Minister, RSC paying for it all as Chancellor) spent on Bomb and Bombers, because You never can tell. Grateful we were, too, when erstwhile Allies rattled their sabres. Then in 1983 a factor in M.Foot losing an Election was nuclear Unilateralism, and in 1987 N.Kinnock lost in part due to an odd notion of tactical withdrawal if Spetznaz hit Suffolk beaches. A factor in student CND activist A.Blair winning in 1997, and staying in, was his spending muchly, inc. atomically, though we had no evident organised-body enemy, because he knew not what lay on the other side of the hill.

This Guardian/BBC campaign is not about profit, or distasteful regimes. It would continue if BAE were again a Royal Ordnance Factory, supplying democrats. It's about an honest belief that parlay defuses conflict, that sweet reason can prevail. But You never can tell. Teamwork (it was called Collective Security in 1929) requires somebody, preferably sane - so us - to carry a big stick. Voters know that, so an open campaign to emasculate UK Force would not fly. Reviving a conspiracy theory - arms as capitalists' welfare - might.

Always a Sapper 9th Jul 2007 18:45

Dohh ...:ugh: yet another potential home goal instigated by those idiots currently sat in the treasury and gleefully supported by the short-sighted muppets in the Government...

Our competitors must be p*ss*ng themselves laughing at this lot... :*

knowitall 9th Jul 2007 18:50

"On the contrary, Britain bought the over-priced Hawk trainer jet from BAE purely to help the firm's exports"

i note the Grauniad fails to mention how much tax Treasury has collected becasue the Hawk over its life time

Jimlad1 10th Jul 2007 07:17

Nor the rather basic fact that if HMG shuts its main export team for defence exports, foreign customers will interpret this as a snub to themselves. Having spent a short time there once, I was struck by the influence that DESO can have on a foreign government which thinks it is dealing with HMG as well as the company. Lose this and you lose business.

GOLF_BRAVO_ZULU 10th Jul 2007 09:09

We stopped the men o' the North getting their hands dirty building and tending mill machinery, digging coal, pouring and forging hot metals and making transport vehicles. Dammit, they are still soiling their hands building ships and aircraft: it has to stop!

It's a shame that the Hawk is considered such a poor aeroplane as the Saudi boys are about to buy some. Did nobody tell them?

Jimlad has a point, incidentally

sprucemoose 10th Jul 2007 09:35

HDES said during Paris that this rumour was bo11ox, BTW.

Jackonicko 10th Jul 2007 10:31

Another case of the Guardian reporting as fact what it merely wishes was true, perhaps, Sproocer?

ORAC 16th Jul 2007 11:25

Execs Worry Export-Boosting U.K. Agency May Be Cut

Inspector Dreyfuss 25th Jul 2007 15:06

The PM has indeed decided to transfer responsibility for promoting defence exports to UK Trade & Investment. Broon's decision, no consultation.

Squirrel 41 25th Jul 2007 15:31

To be honest, if DESO is actually worth it's salt to it's customers (Defence PLC), it'll thrive under UKTI (or at least it will be distinctively more impressive than much of the rest of the organisation).

If nothing else, there should be synergies of approach - so perhaps not a bad call. Personally, I'd love to close UKTI and DESO down, but that's (i) not a politically acceptable option becuase (ii) not all markets are as open and transparent as the UK/EU.


ORAC 26th Jul 2007 13:33

DefenseNews: Brown Confirms Demise of U.K.’s Defence Export Services Organisation

British Prime Minister Gordon Brown has signaled he will shut down the Defence Export Services Organisation (DESO) in its current form. Brown told members of Parliament in a written statement July 25 that defense exports in the future are to be integrated with the government’s general trade support activities.

The government will move “responsibility for defense trade promotion from DESO to UK Trade and Investment,” the statement said. “This will provide much greater institutional alignment across government.” UK Trade and Investment is a government body responsible for aiding exports of all kinds from Britain, and providing assistance for incoming investment here.

British defense exports are second only to those of the United States. DESO figures released recently show exports in 2006 reached $10 billion, part of a total of $41 billion in overseas sales achieved since 1998.

Exactly how the government move will affect the defense export sales effort here is unclear at the moment. One government insider said it appears the size, shape and nature of the government effort will likely change.

Brown’s statement said account would be taken of the “specific features of defense exports, including the continuing role of the Ministry of Defence.”
Institutional arrangements will come into effect as quickly as possible after an implementation plan to replace DESO is completed by the end of 2007, said the statement.

But BAE Systems, the country’s largest defense and aerospace firm, expressed concern about the move. A BAE spokesman said the company “is surprised and disappointed about this decision, which has been taken without any consultation with the industry stakeholders. The U.K.’s defense industry has been hugely successful in the export market over a period of many years, not least because of the close support of DESO operating within MoD, and the associated links with the U.K.’s greatly respected Armed Forces.

“It is not at all clear how this will work under the proposed new configuration,” the spokesman said. “BAE Systems looks forward to being consulted by government on this fundamental alteration affecting the government’s support to one of the U.K.’s few very successful manufacturing, engineering export sectors.”

The move also drew an immediate response from Derek Marshall, the director of aerospace, defense and homeland security at the Society of British Aerospace Companies, a leading trade body here.

“SBAC is disappointed by the decision to reallocate the responsibilities of the Defence Export Services Organisation — ending more than 40 years of coordination and promotion of defense exports,” he said. “We will need to take some time to understand and assess the implications of the new arrangements. It is disappointing that the government did not consult or discuss this approach with industry before making this decision.”

Shackleton Mark 3 26th Jul 2007 21:11

Shackleton Mark 3
Quite frankly the decision to close DESO is appalling. Do they not realise that despite an annulau budget in the region of £15 million this organisation is actually virtually self financing. Large industry may be able to cope under the auspices of Trade and Industry or they can go it alone but what about the hundreds of small and medium sized enterprisies that rely on DESO for support. So typical of Gordon Brown to kick them in the teeth

tornadoken 27th Jul 2007 14:03

I lived unaffected through, was it 6 changes of name in what is now DPA (or was that last week?) Odd fiefs spin off - State Airport Admin left MoA for example, just berthed in another place: Govt. business conforms to the Law of Physics which says matter is neither made nor lost, but merely changes form. The Idea is that by integrating Defence Exports with sponsorship of other industries, UK plc will win wider business than from kit alone. (Old BAC) knew nothing of bricks and mortar, but that became central to all 3 Saudi deals. Existing expertise in DESO will change its e-mail address and press on.

ORAC 28th Jul 2007 10:12

Torygraph: BAE backlash against axing of export agency

BAE chief's furious letter to Gordon Brown [pdf file]

The head of Britain's leading defence company has reacted with fury to Gordon Brown's decision to shut down a key government export agency without consultation. Mike Turner, the chief executive of BAE Systems, has demanded a meeting with the Prime Minister after the responsibilities of the Defence Export Services Organisation (Deso) were transferred to the Trade and Industry department, The Daily Telegraph has learned.

The defence industry, which has exports worth £6 billion a year, was said to be "seething" over the decision. The Government said it wanted defence exports "more effectively integrated" within "general trade support activities".

Deso was caught up in the Serious Fraud Office investigation into allegations that a Saudi Arabian prince had received payments of up to £30 million in the £43 billion Al-Yamamah arms deal for British Tornado jets. BAE allegedly made the payments with the knowledge of MoD officials and has always denied any wrongdoing. The SFO inquiry was halted last December by the then Attorney General, Lord Goldsmith. Tony Blair said it was "in the national interest" to stop it.

Mr Turner, who with other defence industry leaders was said to be "utterly furious", wrote to the Prime Minister saying he had "considerable concern" about the move. "I am very disappointed at the complete lack of consultation with the industry stakeholders," he wrote in an unprecedented letter obtained by this newspaper.

Mr Turner warned that Britain's export trade would suffer huge damage without full Government support at a time when other defence companies in Russia, America and France were getting support "at the very highest levels". "I can think of no benefit that 'synergy' with UK Trade and Industry can offer that can begin to outweigh the lost excellence of the Deso operation," he said.

A spokesman for the Prime Minister said Des Browne, the Defence Secretary, had been consulted over the decision and it was "up to him who he consulted within his own ministry". It was important to bring all government exporters "in line" under one department, he added. Industry concerns would be addressed during a five-month consultation period and Mr Turner's issues would be dealt with by the Cabinet Secretary.

GasFitter 28th Jul 2007 13:33

My personal experience of DESO is that it was staffed by honourable people.
Mine is quite the opposite .... and remains so.

End of dit.

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