Terry Murden: Pressure grows on Cameron to spare defence in spending cuts

Published on Tuesday 28 September 2010 22:46

WITH Liam Fox, the Defence Secretary, already doing the Opposition's bidding, the call for restraint in the forthcoming spending review is getting louder.

Fox has warned in a leaked letter to his boss David Cameron that draconian cuts are not feasible at a time when the country is at war.

Now we have Mike Salter, chairman of the Scottish Chambers of Commerce, adding his voice. Salter told his annual dinner guests in Glasgow last night that Scotland is suffering from deteriorating investment in its defence industry and simply cannot afford further cutbacks.

Fox is understandably worried about the impact of cuts on troop morale, and also on the Conservative party, the traditional home of the generals and admirals.

Salter is bothered by the further demoralising affect that deep cuts would have on those in the Scottish defence industry and on the economy.

Not only would it mean a direct cut in investment in naval, army and RAF bases, but it would have a devastating knock-on effect throughout the supply chain.

For anyone who needed reminding, Scotland is building two big aircraft carriers which are in the sights of Treasury cost-cutters keen to see 10 per cent sliced off the 37 billion annual defence budget.

The Defence Secretary wrote in unequivocal terms to the Prime Minister that the cuts would be "financially and intellectually virtually impossible". His comments were described by Downing Street as a "robust presentation".

The Scottish Chambers had already decided enough was enough and we learned last night that it had written to Fox warning him of the risk to "security, skills and our economy".

In Salter's speech he said that he hoped the Defence Secretary and his colleagues were listening.

But events overtook him and clearly show that Fox needed no reminding of the potential consequences of the spending review.

Safety first is Dudley's mantra, let's hope the US is listening

BOB Dudley, the incoming chief executive of BP, has wasted no time getting to grips with the task ahead.After being ushered into the job to replace the discredited, though perhaps unfortunate, Tony Hayward, the new man has fired the manager responsible for deep water wells.

Andy Inglis, chief executive for exploration and production, looks like scapegoat number two for the Gulf of Mexico spill, though his departure, like that of Hayward, was almost inevitable as the company seeks to restore its battered reputation.

The key to that task is safety, the holy grail of energy companies, and by unveiling a new set of safety procedures Dudley wants the world to know that under his watch there will be no compromises.

The market appeared to have taken his actions on board, lifting the shares in an otherwise indifferent trading session. But convincing those, particularly in America, who hold the key to new contracts will take a little longer.

Catch 22 situation for banks as new rules will hamper lending

THE era of cheap money is over. If we didn't already suspect it, the banks are going to find it more difficult to lend. Bob Diamond, chief executive-designate of Barclays, told an investment conference yesterday that the new rules on banking emanating from Europe will add to the existing squeeze on available funds and make borrowed money more expensive.

But this is a warning to governments not to go too far in their various codes and rules as banking reform puts banks into the difficult position of trying to simultaneously conserve capital and lend more.

While it is not in the interest of the banks not to give their customers what they want, the new arrangements will inevitably increase the tension between them. Diamond says more customers' decisions will be relationship led rather than being influenced by transaction or price.

But banks are under pressure to raise fees and in some cases are restricting the range of services they offer.

The UK government wants more banks serving businesses, but the new entrants are struggling to make headway in an already competitive market. To compete they need scale, and those with scale already have the market sewn up.

At the fringe, the smaller players focus on service and branch manager discretion. But it only works up to a point. Even if they offered the best service in the country, the small banks could not cope with a huge influx of customers.