BAE to lose billions in defence cuts

BAE Systems will have billions of pounds worth of government orders torn up under budget cuts being drawn up this month by ministers - reports The Observer.

Defence sources said the government would scrap plans to buy four more Astute nuclear submarines from BAE, worth £3.5bn.

Ministers also want to cancel their contract to buy a third tranche of Eurofighter jets, worth more than £5bn, from the company.

The government wants to make up to £15bn of cuts in its military budget over the next decade as it tries to rein in public spending (despite agreeing to increase our payments to the audit-failing EU's budget by an astonishing 63% - to £6bn net or £11.5bn gross a year).

The defence industry and the MoD have been locked in fraught negotiations about how to make the savings.

The government is also set to axe plans to order two further Type 45 destroyers from shipbuilding partners VT Group and BAE. The two companies are building six destroyers, which cost about £600m apiece (only a few weeks worth of our net payments to the EU budget), but had hoped to receive an order for another two.

Howard Wheeldon, senior strategist at BGC Partners, said defence companies have been trying to co-operate with the government over how best to make the cuts.

'The industry in my view will have done its utmost to support the government over its financial constraints,' he said. He added that he expected the Royal Navy to bear the brunt of the budget cuts.

A spokeswoman for the ministry said: 'The MoD is currently in the middle of its planning round, when it considers a very wide range of options as a matter of course. We are not prepared to comment on any specific proposals before the planning round has run its full course.'

Not only are these cuts potentially over-stretching our armed forces even further than at present, and possibly even putting military lives at risk by trying to over-extend the life of old equipment, but they could also cause the loss of hundreds, if not thousands, of jobs at BAE's British plants.

Yet another example of the utterly misplaced priorities of the government and those MPs who irresponsibly approved the 63% increase in our payments to the audit-failing EU.

That's billions of pounds a year that could be used to prevent these cuts, if they weren't being handed to the EU instead.