Cost of aiding arms exports

Subsidies to arms exports cost the taxpayer at least £450m and possibly up to £930m a year, a report published today by three British security policy thinktanks claims.

The subsidies are both explicit and hidden, consisting of cheap export credit insurance, investment in military research and development, and distortions in the way the Ministry of Defence procures weapons systems, it says.

The report suggests the government exaggerates the importance of arms exports for maintaining jobs. The number of people employed in arms-related industries has fallen from 470,000 in 1985 to 200,000.

Of these, 65,000 are employed on arms exports, according to official figures, just 0.25% of the national labour force. Far from providing jobs, the arms export industry diverts skilled workers and investment away from more effective job-creating activity in the civil economy, the British American Security Information Council (Basic), the Oxford Research Group, and Saferworld say.

Defence jobs lost could be accommodated within the job market, especially as skilled manufacturing is facing shortages, says the report, Escaping the Subsidy Trap: Why arms exports are bad for Britain.

It identifies three categories where government support props up inefficiency:

• Direct subsidies, through the Defence Export Services Organisation, the role of defence attachés, the use of the armed forces for promotion and the Defence Assistance Fund, amount to £31m.

• Export credits providing insurance to exporters and buyers of UK equipment at premium rates amount to £222m a year.

• A procurement policy where-by the MoD appears prepared to purchase kit inferior to or more expensive than that available from non-UK sources to promote exports amounts to a £200m annual subsidy. If spending on defence R&D is taken into account the subsidy increases by a further £483m.