Dumping Eurofighter could cost billions of pounds, Lib Dems told

LIBERAL Democrat plans to cancel Britain’s Eurofighter order appeared close to collapse last night after it emerged that any savings made by such a move could easily be wiped out by a compensation bill running into hundreds of millions of pounds.

Jim Wallace, the Scottish Liberal Democrats’ leader, has been coming under increasing criticism since he announced two days ago his party’s plans to axe the final tranche of Britain’s Eurofighter order - some 88 planes - to save money.

Such a move could cost tens of thousands of hi-tech jobs across Britain, including 2,000 in Edinburgh.

The Liberal Democrats want to save 1.3 billion from various defence projects, including the final third of the Eurofighter Typhoon aircraft.

Union leaders have warned that the former BAE Avionics plant at Crewe Toll in Edinburgh, which has been at the heart of the development of the Eurofighter, creating the Captor radar system, is likely to be among the centres hit.

The Lib Dem plans came under fresh attack yesterday after the Ministry of Defence confirmed that the government would have to pay compensation to its European partners if it pulled out of the joint fighter project at this late stage.

According to a spokesman for the MoD, it was impossible to say how much the compensation would be, but he went on: "I am sure compensation would be part of it. It would be subject to negotiations."

He said a decision by one of the four collaborating partners to withdraw from the project before the final phase would be so serious that it would lead to high-level talks between the national governments to thrash out a suitable financial settlement for the remaining three.

The spokesman refused to discuss what the potential financial penalties might be. However, defence analysts have said they would expect such a compensation bill to run into hundreds of millions, and possibly billions, of pounds.

A Labour Party spokesman said: "The Liberals have clearly not thought about how to protect the jobs of the people they are now threatening to make unemployed, and they also have no idea how much compensation they would need to pay to Germany, Spain and Italy for the privilege of sacking these workers."

Peter Duncan, the shadow Scottish secretary, said: "This proposal by the Lib Dems represents appalling value for money.

"Not content with risking hundreds of Scottish jobs and the security of Britain, they also seem happy to raid the taxpayers of their hard-earned cash to pay for this folly of a plan."

Mr Wallace’s Eurofighter policy suffered another blow when his Labour Party coalition partners in the Scottish Executive distanced themselves from the Lib Dem plan, warning that it did not sit well with the Executive’s priority of growing the economy and protecting business.

A spokeswoman for the First Minister said: "We can understand there may well be some form of conflict, some form of difference between what the national party policy is and what the government does."

Mr Wallace defended his party’s policy yesterday by claiming that Britain’s aircraft manufacturers could "diversify" to offset the job losses which would follow if the fighter contract was cancelled.

The enterprise minister said the Lib Dem plans to cancel the Eurofighter would not take effect for another five years, and he went on: "I believe that a company like BAE Systems, for a company of that size, with five years to plan, can find other ways of engaging, deploying and using their employees.

"Our assessment is strategic. It’s not a policy of closing down jobs, far from it; it’s a policy based on a strategic assessment of our defence needs."

He concluded: "This is a very lengthy lead-in time, with which it [BAE] can deploy resources, win other contracts and diversify."

However, Tim Ripley, a defence analyst at the Centre for Defence and International Studies, said the cancellation of the third tranche of 88 aircraft would be a "hammer blow" to Britain’s defence manufacturing base.

He said that the overall cost of the project to Britain was expected to be 18 billion, but he stressed that most of this - about 12 billion to 14 billion - had already been spent and the third tranche of planes would be the cheapest and most cost-effective.

Mr Ripley said: "We will be buying them at a fixed price from a production line, when most of the money has already been spent on research and development."

He added: "If you want to build planes in the future, you have to go ahead with the third tranche. It would be a very short-term saving indeed."