Downing Street Years - Margaret Thatcher [152]
Again, as with President Carter’s Administration, there was plenty of hard bargaining. But I always knew that President Reagan and Caspar Weinberger would be conscious of Britain’s and the alliance’s long-term interests and would ultimately do what they believed to be right in defence terms, rather than just expedient or popular with the Congress. As before, the whole question of charges and levies arose. We for our part pressed hard for a fixed percentage of the work on the development of Trident to go to UK sub-contractors. The Americans who were building up their own navy were anxious to discourage us from reducing our surface fleet which we were intending to do following the Defence Review that year. We indicated the possibility of reprieving the amphibious landing ships HMS Fearless and HMS Intrepid, which pleased them. They also pressed for an extension of our armed forces’ engagement in Belize, which has now become a virtually permanent commitment.
In the end, we concluded an agreement with the United States to buy Trident II on more advantageous terms than Trident I. The missile was to be purchased by us at the same price as the United States Navy’s own requirements in accordance with the Polaris Sales Agreement. But the additional overheads and levies would be lower than would have been the case under the 1980 Agreement to purchase Trident I. In particular, the so-called R & D levy would be a fixed sum in real terms and there would be a complete waiver of the facilities charge which was part of the Trident I deal. The terms protected us completely from the escalation of the development cost. The United States would set up a liaison office in London to advise British industry on how to compete on equal terms with US industry for sub-contracts for the Trident II programme as a whole, including the American programme. We also decided to improve and increase the size of the submarines which would carry Trident, making them more efficient and less detectable, and by running longer between refits make them more available for patrol. The total cost of Trident II and the other changes over the whole period would be £7.5 billion, just over 3 per cent of the total defence budget over the same period. When I learnt of the terms now being offered I was delighted and I gladly authorized their acceptance.
THE DEFENCE REVIEW
It is sometimes forgotten, now that the map of Europe and indeed the world has been reshaped with the fall of communism, just how painful were the consequences of the West’s efforts to strengthen its defence effort in the 1980s. The United States was as a result unable to reduce its public spending, with the consequence that the world faced higher interest rates, threatening economic recovery. We in Britain, for our part, had to match the necessary commitment to strengthen our defence with rigorous evaluation of what we could afford and where resources could be best applied. Economic, strategic and technical arguments alike pointed towards a thorough review of our defence commitments and how they should be fulfilled — and not only ours but those of the other NATO allies. Yet, at the same time, I was conscious of the danger that the wrong signals might be given to left-wing opponents of strong defence at home and to our enemies abroad.
In early November 1980 I chaired a meeting of the Overseas and Defence Committee of the Cabinet (OD) to consider a paper from Peter Carrington and Francis Pym which argued that Britain should take the initiative in proposing a wide-ranging review of NATO to make it more relevant to western defence requirements and more cost