‘It’s all about ABBA,’ a military acquaintance whispered when I mentioned the scandal of the British Army’s order of 589 Ajax armoured vehicles, for which -‘initial operating capability’ status has been withdrawn following multiple cases of soldiers suffering after-effects of intolerable noise and vibration. What could that possibly have to do with the great Swedish-songsters?
Nothing, he explained: it is an acronym for ‘Anything But British Aerospace’, allegedly a mantra in defence procurement circles in a previous era. When the brass hats decided to replace the army’s 1970s-era tracked combat vehicles, BAE Systems (as it now is) proposed a variant of the Swedish-designed CV90 with Bofors guns, of which more than a thousand are in service in northern Europe and to very good effect in Ukraine.
But the contract was awarded to the Ajax design proposed by General Dynamics of the US, which had promised a new factory and hundreds of jobs at Merthyr Tydfil in south Wales. The first Ajax deliveries were due in 2017 but delayed; about 170 are understood to have arrived so far, but trials have been on-off because of noise and handling problems, some leaks saying the vehicles were unsafe above 20mph and could not fire their cannons on the move.
Meanwhile, costs rose from £3.5 billion to a current figure above £6 billion. At the defence select committee last week, Secretary of State John Healey declared himself ‘furious’ at inadequate internal reporting of this fiasco: ‘The army is no longer in charge… and a new senior responsible officer is in place. I have been clear that we must back it or scrap it.’
At a time when pressure for well-directed defence spending is acute, could there be a more egregious example of how not to do it? And whose fault is it? The General Dynamics order was first agreed while Labour was in power before the 2010 general election, and it’s fair to note that Merthyr Tydfil is a Labour fiefdom. But seven Tory defence secretaries and ten procurement ministers followed that election and preceded Healey.
If the decision is to scrap Ajax, BAE’s CV90 is still a runner to replace it. But recent advances in warfare may have thrown the whole project into doubt: the price of one Ajax would buy thousands of short-range tactical strike drones, for example. Public spending choices have to be made without knowing the future, but voters have a right to expect rigorous oversight. If ministers are going to spend an extra £500 per citizen per year to hit a defence budget of 3.5 per cent of GDP by 2035, they’ll have to do a lot better than Ajax.
US rough justice
Stand by for news of a potential marriage between Rio Tinto and Glencore, first mootedin 2024, to create the world’s biggest mining company with a huge stake in global copper production. Watchers expect Rio, the bidder, to ask for an extension under City takeover rules while advisers haggle over the value of Glencore.
But take note also of a longer-running Rio story, well below the headlines, concerning the fate of its former chief financial officer Guy Elliott at the hands of the US Securities and Exchange Commission (SEC), which in 2013 launched an investigation into Rio’s financial reporting in relation to mining assets in Mozambique.
In 2017, civil proceedings for fraud and other charges were brought against Elliott, the company and its former chief executive Tom Albanese. Rio and Albanese settled on a ‘neither-admit-nor-deny basis’. Elliott’s fraud charges were dismissed in 2019, but he held out for exoneration from the other minor charges. Only last month were the SEC’s remaining charges against Elliott (now 70) finally dismissed, 13 years after the case opened; for eight of those he has been unable to sit on any other corporate boards.
The UK Financial Conduct Authority took less than a year to look at the same allegations against him and set them aside. The moral is familiar for all British executives: never tangle with the US justice system.
Surrounded by Soros
The dollar strengthened and safe-haven precious metals shed recent gains in response to Donald Trump’s anointing of Kevin Warsh to succeed Jerome Powell as chairman of the US Federal Reserve. Warsh was preferable to the other candidate, White House insider Kevin Hassett, a Trump apologist who would likely have cut interest rates faster to please the boss, at risk of stoking inflation.
Warsh has sufficient standing to have been a candidate for governor of the Bank of England in 2020 and was an ‘inflation hawk’ in a previous stint at the Fed, from 2006 to 2011. Nowadays, however – says my man on the salad bar in the Fed canteen – he’s seen in Washington as ‘more of a political animal than an economist’. Trump seems to have picked him partly because he’s the son-in-law of his billionaire buddy Ronald Lauder, partly for his ‘central casting’ looks and partly (according to the President’s Truth Social post) because ‘he will never let you down’, hinting he’s expected to do Trump’s bidding.
But Warsh surely can’t want markets to see him that way, and Fed rate decisions are still taken by a committee of which the President has yet to grab control. One way or another the fight for Fed independence, and the potential of that fight to destabilise global markets, is far from over.
And here’s a footnote for conspiracy theorists – including, if he’s reading, Trump himself, who has repeatedly made allegations without evidence that the 95-year-old Hungarian-born financier George Soros has supported violent protests and sinister political activities. Kevin Warsh turns out to be a protégé of the veteran investor Stanley Druckenmiller, who was a partner of Soros in the Quantum Fund, which made £1 billion betting against the pound in 1992.
And the young Quantum analyst who urged Soros and Druckenmiller to double down on that bet was none other than Scott Bessent, now Trump’s Treasury Secretary. You might say Soros has the President surrounded by Manchurian candidates.
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