Cabinet at odds on European fighter

A CABINET battle over the future of the European Fighter Aircraft was in prospect yesterday as the Treasury was reported to want to kill off the pounds 20bn project while Malcolm Rifkind, Secretary of State for Defence, will on Monday try to persuade the Germans to stay in.

The Prime Minister's office flatly denied reports of a Cabinet split over the aircraft project. Treasury sources, however, confirmed that if Germany does pull out 'all options are open', while the Ministry of Defence rubbished suggestions that Britain would be better off buying the United States F-22 or going in with the French Rafale.

Michael Heseltine, President of the Board of Trade, also denied any split, saying that as the Cabinet had yet to receive advice on the project's future, 'it is not possible to be split about it'.

However, the man who in 1986 resigned as Secretary of State for Defence over Westland said on ITN that there plainly would be options and he hoped the Cabinet would reach a decision 'in the best interests of the defence capability of this country and of the British industry that serves it'.

The projects' backers say cancellation of the project would cost an estimated 30,000 to 40,000 jobs, dispersing high-technology skills.

Both the Ministry of Defence and the Prime Minister's office emphasised that the Germans have yet formally to notify a decision to pull out, despite last Tuesday's decision by the ruling coalition parties to do so. Mr Rifkind, who is to meet Volker Ruhe, his German opposite number, on Monday, will be seeking to establish what Mr Ruhe has meant by saying he wants a 'cheaper, lighter' aircraft. Suggestions that the production phase of the aircraft could be put back a year to ease German budget difficulties or that the Germans could take a less expensively equipped version have not been ruled out.

However, Spain - which, along with Italy, has a part in the four-nation project - cast a further shadow over the project on Thursday when its defence ministry said it too wanted cost reductions.

John Townend, chairman of the Conservative backbench finance committee, said that if two countries pulled out cancellation 'would be the only course'.

Treasury sources themselves said that cancellation would save nothing this year and little over the three-year planning cycle, as the tooling-up costs for production arise only towards the end of that period. But Alan Clark, who until the general election was Minister of State for Defence Procurement, responsible for the project, said: 'The Treasury have always been against it and have always been trying to do it down.'

Foreign alternatives might be cheaper, he said on BBC radio. 'But the Treasury do not take into account the industrial capability, the wealth that's generated in England instead of overseas purchasing, the employment potential and the whole long-term need to retain these skills and capability in this country'.

That view would plainly be shared by Mr Heseltine. At the launch of his reorganisation of the DTI into industrial sectors, including one for aerospace, he said: 'I prefer the British option.'

The Ministry of Defence remained bullish about the project, officials saying the American alternative was almost three times as expensive and five years behind, while the French version did a different job and also cost more.

MoD 'mystified', page 3