How the UK profits from war

As allies look sorrowfully on at our underfunded and shrinking armed forces, Britain’s arms trade is making a killing, with billions of pounds of taxpayers’ money being handed to arms manufacturers that give investors rich returns.

Right-Wing Watch

In taking the lead, alongside the US, in military action against Houthi rebels in Yemen, Britain attempts to boost its image of being a ‘tier one’ military power, with a navy, army and air force capable of being deployed anywhere in the world, led by a ‘wartime prime minister.’ In reality however, facing a funding, procurement, and personnel crisis, similar to the Royal Mail, the military has been devalued and degraded. Even our closest allies recognise it for what it is. Britain’s shrinking army is “not what it used to be,” a leading US general warned this week.

Meanwhile, our arms trade is making a killing. Billions of pounds of UK taxpayers’ money are being handed to arms manufacturers, who are paying shareholders lucratively. Our highly subsidised arms industry is supplying weaponry to repressive Gulf Arab states, the most prominent and lucrative of which is Saudi Arabia. Through export relationships, the UK government is effectively assisting some of the most violent repression of civilians in countries around the world, as the capability and credibility of our own cash-starved forces declines.  

It begs the question: Where does the government’s priorities lie? We may have to accept that the idea of an ‘ethical’ foreign policy much discussed two decades ago, might not be feasible in today’s dangerous world. Nevertheless, it is truly strange to be arming some of the world’s dictators while our own military struggle to fulfil what they are asked to do. You either ‘cut your cloth’ or get more cloth.   

The high-profile failures in our defence programme are piling up.

On January 28, the Sunday Telegraph devoted its lead front page story to UK warships having a ‘lack of missiles to take out Houthi bases.’ The gist of the story is that none of the Royal Navy’s destroyers or frigates have the ability to fire missiles at targets on land, leaving the US to carry out the majority of strikes on Houthi targets. Clearly, this is not to the liking of the Telegraph, which cites a former senior defence chief, who says it was “scandalous” that Navy ships were not equipped with surface-to-surface missiles.

The unnamed former defence chief is joined by Tobias Ellwood, former chairman of the Commons defence committee, who warns that the situation was “unsustainable” and is urging defence secretary Grant Shapps to conduct an urgent review. “We can’t continue to do this with a surface fleet that’s too small and cannot fire on land at range,” says Ellwood.

Just a week earlier, two Royal Navy warships collided in Bahrain ‘due to faulty rewiring.’ The Ministry of Defence (MoD) declined to comment on the causes of the accident, saying its investigation was continuing. Shapps, meanwhile, denied that the crash between the two warships was a product of ineptitude. “We don’t say it’s incompetence when we see an aircraft come down,” he said, rather strangely given that pilot error is always regarded as a possible cause of aircraft crashes.

This week, Rishi Sunak rejected a call from chief of the general staff General Patrick Sanders to prepare to ‘mobilise the nation’ for a looming war with Russia, insisting that the British Army would remain a volunteer force. Sanders has previously complained about defence cuts. In July, amid a fierce row over further proposed cuts to land forces, the General threatened to resign. He told the then defence secretary, Ben Wallace, that he could “not deliver without more headcount and budget.”

Journalist Stephen Armstrong argues that General Saunders’ comment this week was a cry for help, as, with a British military that is understaffed and ill-equipped, the UK ‘could not raise a conscript army to fight Russia even if it wanted to.’   

The Tories’ programme of austerity has meant that the UK military has faced years of cuts and is no longer regarded as a top-level fighting force. Since 2010, the armed forces have faced a real-terms pay cut. “We ask them to make the ultimate sacrifice and the least we can do is to give them some decent pay,” Labour’s Emily Thornberry said in 2019.

Shadow defence secretary, John Healey MP issued a scathing response to the recently-published National Audit Office’s (NAO) The Equipment Plan 2023 – 2033 report, which sets out its intended investment in equipment and support projects over the next 10 years.

“The Conservatives are failing British troops and British taxpayers. Major defence decisions are now delayed until after the next election, and ministers have no plan to control defence budgets. With war in Europe and a Middle East conflict, this risks leaving our armed forces without the equipment and troops they need to fight and fulfil our NATO obligations,” he said.

As allies look sorrowfully on at the UK’s underfunded and shrinking armed forces, as Bronwen Maddox, chief executive of Chatham House think-tank described, others are raking in fortunes from Britain’s weapons trade.

A system of ‘corporate welfare’

In September, as global military spending reached a record high, the world’s largest arms fair took place in London. The Defence and Security Equipment International (DSEI) takes place in Britain every two years. Around 1,500 companies selling bombs, guns and other weaponry, and military delegations from around the world gather in London.

The media organisation Declassified UK, which uncovers UK foreign policy, military and intelligence agencies’ real role in the world, attended the event. They spoke of how corporations such as MBDA, Babcock and Thales all won lucrative new contracts from the UK’s Ministry of Defence for missiles and technical support to armoured vehicles in the wake of the conflict in Ukraine. They noted how Babcock and BAE, the UK’s largest arms exporter, have set up offices in Ukraine, positioning themselves to secure new deals, and how, since Russia’s invasion of Ukraine, BAE’s share price has jumped more than 75 percent.

“As the UK continues to pour weapons into Ukraine, the devastating conflict is providing a boon to UK and NATO military industry,” notes Declassified UK.

In its ‘The Asset Manager Arsenal: Who owns the UK arms industry?’ report, the think tank Common Wealth, highlights how the arms industry is highly subsidised by the UK state and sells most of its weaponry to repressive Gulf Arab states. The industry is governed by a different set of rules than the rest of the UK economy and is the recipient of significant state intervention that reduces risk for investors. Not only is the MoD its primary client, but research and development (R&D) costs for arms companies are predominantly paid for by the state and by export customers as a component of procurement contracts.

BAE Systems, the largest arms firm headquartered in Britain, spent £2bn on R&D in 2022, yet only 14 percent was paid for by the company itself. That year, the company boasted £21.25bn in revenue. Alongside AstraZeneca and BP, BAE Systems was name as a FTSE 100 organisation with the highest chief executive officer (CEO) pay in 2022, according to research by the High Pay Centre. That year, Charles Woodburn of BAE Systems made £10.69m.

QinetiQ, another major private UK arms manufacturer with a £1.58bn annual turnover, pays just 4.5 percent of its research and development costs.

Meanwhile investors in the two firms have seen massive returns in that time – QinetiQ’s 23.2 percent return on investor capital was almost twice the FTSE average of 11.7 percent.

Just three investment firms (BlackRock, Vanguard and State Street) hold a combined average of 16.3 percent of shares listed the major arms companies operating in the UK. Just two investment firms — BlackRock and Capital Group — together control more than a quarter of the MoD’s prime supplier, BAE Systems.

The Common Wealth authors conclude that the UK’s arms export base has grown more concentrated with a limited pool of export partners and dependence on political relationships with Gulf monarchies, the most prominent and lucrative of which is with Saudi Arabia. In 2022, 47 percent of the value of Standard Individual Export Licenses (SIELs) for arms went to Gulf Cooperation Council (GCC) countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

“Arms companies are officially private companies, but they are supported by the state in a way no other sector is,” said Anna Stavrianakis, a professor of international relations at the University of Sussex, and one of two academics who endorsed the report.

“Asset managers like BlackRock, Vanguard and Capital Group own a significant proportion of the arms industry, meaning that arms production is effectively a system of corporate welfare. The costs are socialised but the profits are privatised,” she added.

QinetiQ, the relatively unknown privately-owned military technology firm, is especially interesting in this discussion. The firm was once part of the MoD before it was privatised and floated on the stock exchange in 2006. It has since become a gold mine, paying out over £500m to shareholders in the last decade. As well as having an ongoing contractual relationship with the MoD, its largest single shareholder provides significant financial support to the Conservative party.

Christopher Harborne, a Thai-based businessman with interests in aviation fuel and crypto trading, gave a record £1m donation to the Office of Boris Johnson in November 2022, a company controlled by the former PM. It was believed to be the biggest donation made to an individual MP in UK history. It has been speculated that the donation to Johnson was intended to fund his potential return to the leadership of the Conservative Party.

Since 2001, Harborne has made at least £15.5m in political donations – £1.8m to the Conservatives and the rest to the Reform Party (formerly the Brexit Party).

Harborne owns more than 10 percent in QinetiQ, with a holding worth £193m. The firm has several sites in the UK, which employ around 5,500 people. Former defence secretary Ben Wallace worked as the firm’s overseas director in the security and intelligence division for two years until his election to parliament in 2005.

Like many defence companies, QinetiQ has witnessed a rise in sales since Russian’s invasion of Ukraine in February 2022. In January 2023, the firm announced it had secured a ten-year IT contract with the MoD, worth £80m.

Policymakers and weapons manufacturers seeking commercial profit from devastating wars has happened in Britain for decades. When Iraq invaded Kuwait in 1990, for example, the UK’s defence procurement minister, Alan Clark eyed up commercial opportunities, telling his boss, Margaret Thatcher, that Britain and its allies should regard Iraq’s invasion as an “unparalleled opportunity” for British arms exports.

This week, Labour MP Richard Burgon called on the government to publish the legal advice on why it is still exporting arms to Israel. Penny Mordaunt’s response was not convincing, that the criteria that the government does not grant arms exports licences to countries where it thinks arms will be misused has not been met in the case of Israel. 

The devastating conflict in Ukraine and the Middle East is proving to be a windfall for UK weapons manufacturers, propped up by taxpayers’ money, as, sadly, war seems to remain an integral feature of the government’s business model.

Right-Wing Media Watch – Tory press in flap over Hunt’s potential tax cuts axe

The International Monetary Fund (IMF) issued a strong warning to Jeremy Hunt this week against cutting taxes in his forthcoming March budget.  In the hope of generating a pre-election feelgood factor, the chancellor is expected to cut income tax, but the IMF is calling for an increase in key areas of public spending instead. It said preserving public services and investment implied higher spending than was reflected in the government’s current plans.

The Fund’s comments sent the right-wing media into a flap.

‘Jeremy Hunt should ignore the IMF’s tax cut warning’ splashed the Spectator. Matthew Lynn, the publication’s financial columnist argued that not only does the economy need some form of boost, but, with an election in a few months’ time, there are ‘plenty of reasons why Chancellor Jeremy Hunt might want to cut taxes…’

In an unsubtle dig at the IMF, Lynn argues that the Fund’s record on forecasting is ‘very poor,’ and it is ‘very committed to a high-tax, big-state economic model.’

“On that basis, Hunt should just ignore it, and cut taxes anyway. There is nothing the IMF hates more than a British chancellor cutting taxes,” he writes.

This is the same publication which just weeks earlier, ran an article headlined: ‘The Tories only hope is tax cuts.’ Columnist Patrick Flynn argued that despite having presided over record taxation, the electorate is ‘aware that fighting Covid cost a fortune and also carries a retained suspicion of the Labour party on tax matters.’

The Sun also worked itself into a tizzy, bemoaning ‘hard-working Brits will have to wait to see if big tax cut is coming as Jeremy Hunt risks fury with warning shot.’ Hunt’s ‘warning shot,’ the Sun reminds, came in response to the IMF’s economic outlook for the UK. “They suggest eliminating loopholes in wealth and income tax,” the report notes. Oh, poor rich people!

GB News, meanwhile, predictably gushed over Tory MP Jonathan Gullis’ comments during a discussion on the subject during Breakfast with Eamonn Holmes and Isabel Webster, that there should be a 1p cut in the rate of Income Tax.

As ever in right wing media commentaries, complex economic arguments are reduced to the language of the playground. Conservative governments have been trying and sometimes succeeding in cutting direct taxes as an engine for economic growth since Nigel Lawson’s 1986 budget and look where it’s got us.

It’s also interesting how the right-wing media keep pushing for tax cuts, despite the policy’s unpopularity with the public. It makes you wonder if it’s the newspaper owners and senior executives who want to the cuts, after all, tax cuts result in the rich getting richer.

The Tory leadership contest in the summer of 2022 was dominated by the timing of tax cuts, yet a poll at the time found there was no great clamour for them among the general public.

People know that tax cuts equate to more austerity for Britain. ‘Yes, the tax burden is high. But the chancellor should note the electorate is far more concerned with the state of public services,’ wrote economist Duncan Weldon in the Guardian this week.

Research carried out for Save the Children in September, found that nearly three-quarters (71 percent) of the public want benefits to be protected, and for those who voted Conservative in 2019, 69 percent want benefits to be protected.

Such findings certainly fly in the face of the prevailing current driven by the tax-cutting obsessed Tory media, and those Tory MPs equally fixated on shrinking the state.

Smear of the Week – Better ‘Smear Keir’

As we approach the general election, RWW is running a ‘Smear of the Week’ campaign, looking at some of the most ludicrous premeditated efforts by the Right to undermine the credibility of whoever they see as a threat.

If any readers come across leaflets or any kind of ads promoting smears or lies at politicians, please do send them our way to potentially feature in ‘Smear of the Week.’

With the prospect of losing power getting likelier by the day, the Tories, who believe they were born to rule, are getting increasingly desperate. Such desperation is being shown in its full glory in the party’s digging into Keir Starmer’s legal career.

The first in our new series takes us to the Conservatives’ controversial ‘Better Call Keir’ ad, which plays on the US legal crime drama TV series ‘Better Call Saul’, part of the Breaking Bad franchise. Coupled with the words ‘Are you a terrorist in need of legal advice,’ the ad seeks to stir up hostility towards the Labour leader’s advice to an Islamist group.

The poster was published on the Tories’ official X account and was accompanied with the comment:

“When Rishi Sunak sees a group chanting jihad on our streets, he bans them. Keir Starmer invoices them.”

Like an earlier smear campaign by the Telegraph, which claimed Starmer ‘helped free some of the UK’s most dangerous prisoners,’ but resulted in the newspaper being labelled ‘the gutter press,’ the ‘Better Call Keir’ ad also backfired.

A community note later appeared beneath the post, which read: “While Sir Keir did represent Hizb ut-Tahrir he also went on to prosecute terrorists with links to Hizb ut-Tahrir as director of public prosecutions.

“There’s is no evidence he invoiced them. Barristers may not withhold services based on a client’s conduct.”

Social media users meanwhile pointed to how the poster even managed to make the Labour leader look cool. Almost.

Makes you wonder what their next tactic against Starmer will be. Alongside ‘Better Call Keir,’ the right-wing media’s accusations of him “thinking that one in a thousand women has a penis” will be hard to better. But there is a long way to go yet!

Gabrielle Pickard-Whitehead is author of Right-Wing Watch

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