Political Commentary: Cabinet flies by seat of its pants

THE GHOSTS of aborted air defence projects hurtle with eerie frequency through the pages of post-war history. It is hardly surprising, therefore, that politicians should be asking whether the European Fighter Aircraft (EFA) is about to enter the same limbo as Blue Streak, TSR 2, Skybolt and Nimrod, after the German decision last week to pull out of the project.

On the face of it, the fresh doubts over EFA have all the makings of a first-class political crisis. For a start, it contains several ingredients of the cocktail that exploded in the Cabinet's faces in January 1986: European co-operation, aircraft and Michael Heseltine.

The importance of Mr Heseltine in this matter should not be underestimated. As Secretary of State for Trade and Industry, he is passionate about retaining, and perhaps reorganising, the UK aerospace industry. He has no love for the Treasury, the aircraft's main critic. He has spent much of the week sending friendly signals of support for EFA to the Ministry of Defence. Indeed, since it was Mr Heseltine who, in his first year as defence secretary, persuaded Margaret Thatcher to accept outline plans for EFA, he sees himself as the project's creator.

So does EFA have the makings of another Westland? First, a little history. After Mr Heseltine walked out of the Cabinet, Mrs Thatcher began to share Treasury doubts about the project. She was always a bit in two minds about defence spending, caught between her deep concern for the security of the realm and an almost equally deep suspicion that the MoD was a financial black hole.

After the 1987 election, therefore, she asked Alan Clark, then at the Department of Trade and Industry (and ironically now one of EFA's most passionate supporters), to attend a ministerial meeting at the MoD and attack the project. According to one participant, Mr Clark was supported by John Major, then chief secretary to the Treasury. But almost at the moment they were arguing her corner, Mrs Thatcher was receiving yet another briefing from a military analyst, who persuaded her to quell her doubts. In the neo-Marxist language adopted by some young Treasury turks, Mrs Thatcher was reconverted by the 'military-industrial complex'. All Mr Clark's loyal advocacy had been in vain.

Officials who have long and lovingly worked on the project talk of EFA's merits in the gung- ho terms of characters in a Nevil Shute novel. They make a persuasive case. They point out that, instead of sending the Jaguar and two types of Tornado to the Gulf, the EFA would have done the work of all three. They say that the Russians are still making advanced MiG fighters and selling them to unstable countries, such as Cuba. They acknowledge that if the Germans confirm their decision to drop out, leaving Britain to carry on with Spain and Italy, the costs will increase by about 2 per cent.

But they insist that the prices would still be lower than those quoted in the existing EFA estimates, because of a successful drive to cut costs. And they point out that the next generation, represented by the US F-22 aircraft, is not only several years further down the track but also three times as expensive.

This pro-EFA lobby finds unexpected support in the Labour Party. One of several reasons why the German Christian Democrat governing party has pulled out of the project is that the opposition SPD favours defence cuts, and the project could therefore become an election issue. By contrast, the Labour Party is wholeheartedly in support, partly because EFA involves about 40,000 jobs, many in marginal constituencies; partly because the Opposition is anxious not to be seen as 'soft' on defence. (Indeed, save for a brief period after the collapse of the Berlin Wall, Labour has hardly mentioned the peace dividend.)

Lancashire Labour figures as politically diverse as Audrey Wise and Jack Straw have been ferocious in their lobbying for EFA's continuation. Martin O'Neill, Labour's defence spokesman, even reportedly told a minister that the Opposition would welcome a Commons debate on EFA, because this was an issue on which it was united.

Against this, we have the Treasury's belief that a good deal has changed since 1988, when the project received its final go- ahead. First, the Chancellor is said to have sent a minute to No 10 several weeks ago, questioning not only whether EFA was the best buy but also whether it was still needed. Second, the German pull-out happens to coincide with what promises to be the most ferocious spending round in recent memory. Big bucks are the stuff of big politics, and the EFA bucks are very big indeed: pounds 20bn for the whole cycle of the plane, and pounds 11.5bn for development, production and investment.

Reports alleging that a new row had started between the MoD and the Treasury, and that the Cabinet was already split, were overblown. Ministers queue up to scoff at the suggestion that a Westland-type debacle is looming. Assumptions that Peter Lilley, the former trade and industry secretary, an ultra-dry and a Euro-sceptic, has joined the anti-EFA forces, are baseless. He has no particularly strong views on the issue, and will probably keep out of it. Similarly Michael Howard, another natural ally of the Chancellor, is reluctant to intervene on issues of which he has no detailed knowledge. There was discussion at Thursday's Cabinet, and Kenneth Clarke, the Home Secretary, according to one account, was among those who implied that there should be at least a question-mark over the project.

Even defence ministers, despite their natural support for it, are proceeding carefully. For example, Jonathan Aitken, the Defence Procurement Minister, has ordered officials to prepare papers on all the alternatives, and to present them as rival manufacturers would a pitch for their product; in other words, to act as devil's advocates. He and Malcolm Rifkind, the Defence Secretary, are optimistic, even confident, that the exercise will establish EFA as the best buy. But they know they will have to test the alternatives to destruction.

All this may take several weeks, perhaps months. There may even be further room for negotiations with the Germans. When Mr Rifkind sees Volker Ruhe, his ambitious German counterpart, tomorrow he will try to establish whether the Delphic Christian Democrat resolution on EFA means a total pull-out, or whether a compromise - in which the Germans could continue to build a modified aircraft with the same frame and engine, but without ultra-sophisticated radar technology - is possible.

He will also want to know whether the German government's reference to 'other partners' means that it is planning a dark deal with the French to buy the rival Rafale fighter. And there will be continuing attempts to stiffen faltering Spanish resolve in the wake of the German pull-out.

All sorts of fudges are possible. But the possibility of a stand-up fight remains, perhaps with Norman Lamont and Mr Heseltine as the key protagonists. The alternatives would be: cancellation coupled with a possible purchase of US F-15 aircraft, and prolonged Tornado use; and the continued development of a British- dominated, European aircraft which preserves the country's hi- tech industrial base. The Prime Minister would have to arbitrate.

There has been no Cabinet crisis yet, but the fuse is burning.