The privatisation of part of the Ministry of Defence’s Defence Evaluation and Research Agency (DERA) has been generally reported as a financial scandal. More important is what it tells us about the politics of New Labour. There are two dimensions to this: first there is New Labour’s commitment to big business and in particular to the arms industry; but second and, arguably even more important, there is New Labour’s willingness to integrate the British defence establishment with the United States’ military-industrial complex.
In 2003, New Labour took the decision to privatise part of DERA. In the first phase of the selloff, a public private partnership, QinetiQ, was established, in which the American private equity company, the Carlyle Group, brought a 33.8% share. When the privatisation was completed in 2006, the Carlyle Group saw its £42 million investment increase in value in less than three years to £374 million. The ten senior civil servants responsible for taking the company into the private sector saw their total personal investment of £540,000 transformed into £107 million. Sir John Chisholm, QinetiQ chairman, saw his investment of £130,000 become nearly £26 million. His salary and benefits in 2006 were over £500,000, but, he assured the media, he was not in it for the money. Similarly, Graham Love, the company’s chief executive, saw his £110,000 investment turn into £21 million.
This scandal would once have provoked a political crisis with Labour MPs protesting against the rip-off of public assets for the benefit of a giant US corporation and a handful of rapacious individuals. Today, it is New Labour’s way of demonstrating that there is no longer any ‘unacceptable face of capitalism’ (a phrase invented by that dangerous left-winger Edward Heath back in the 1970s). It served to show that New Labour is, without any reservations, the party of big business and the super rich. More evidence of the transformation of the Labour Party, if any more were needed, is provided by the recent appointment of multimillionaire businessman, David Pitt-Watson, as the Labour Party’s General Secretary, and the installation of Jennifer Moses, former managing director of Goldman Sachs, as a special adviser at 10 Downing Street.(1) She has been brought in to advise Brown on welfare reform! If the Thatcher government had appointed someone like her to such a position, Labour MPs would have been outraged. Today, barely a murmur.
There were some protests about the QinetiQ scandal. Mark Serwotka of the PCS union described the affair as ‘obscene’. It was condemned by various Liberal Democrat and Tory MPs, and even by the odd Labour MP. The government, however, defended it as a ‘good deal’ for the taxpayer. Indeed, Lord Drayson, then the Minister for Defence Procurement, actually described it as ‘a model for future privatisations’.
The government attitude was perhaps best shown by the fact that far from being shunned for the embarrassment his greed might have caused them, Sir John Chisholm went on to be appointed chairman of the Medical Research Council. Here, he was put in charge of a £450 million research budget and, according to The Times, was charged with forcing through ‘a US-style business-orientated agenda’. Chisholm is one of Gordon Brown’s favourite businessmen.
One last ramification of the QinetiQ scandal that is worth noticing is that it was the then chairman of the company, Pauline Neville-Jones, who, according to Greg Dyke, was one of the principal architects of his removal as director-General of the BBC over the ‘sexed-up dossier’ affair. The chairman of an arms firm is able to intervene in BBC reporting of a disastrous war from which her company is profiting. Only in New Labour Britain (and America) would this be regarded as acceptable.
The Carlyle Group
What has attracted considerably less attention than the financial scandal, however, is the involvement of the Carlyle Group. Its involvement was not just a commercial decision, but a political one. New Labour denials of this are barefaced lies. What the government did was to selloff a share in the Ministry of Defence’s research establishment to one of the most important companies in the US military-industrial complex. In this respect, New Labour is a world leader, because no other major government has gone, or is likely to go, so far along the road of integrating its defence establishment with the Americans. Symbolising all this is the fact that the Carlyle Group’s representative on the QinetiQ board is George Tenet, the Director of the CIA at the time of the Iraq invasion.
The Carlyle Group was established in 1987 to exploit tax loopholes in Alaska, but really only took off in 1989 when Ronald Reagan’s Secretary for Defence, Frank Carlucci, became chairman. He was one of America’s ‘Masters of the Universe’. A former career diplomat, he served in South Africa at the height of US support for Apartheid (1957-59) and in the Congo (1960-62) where he was second in command when the United States organised the overthrow of Patrice Lumumba. He was one of the architects of the rise of Sese Mobuto to power. He was expelled from Zanzibar for subversive activities in 1965 and transferred to Brazil as counsellor for political affairs at the US embassy. Here, he helped consolidate in power the military dictatorship that, with US encouragement, had seized control in 1964. This regime ruled by the most brutal methods, including the routine use of torture. In 1974 he was appointed Ambassador to Portugal, charged with saving the country from socialist revolution. He threw American support behind Mario Soares and the Portuguese Socialist Party as the best defence against socialism. His success here led to his appointment as Deputy Director of the CIA in 1978 and he was in at the beginning of US involvement in Afghanistan. Later he became Reagan’s Secretary of Defence and National Security Adviser. The big US corporations fell over themselves to recruit Carlucci and he has decorated the boards of General Dynamics, Westinghouse Electric, Bell Atlantic, Neurogen, Quaker Oats and Nortel among others.
Under Carlucci, the Carlyle Group became a major military and arms company, operating as the French newspaper Le Monde put it at ‘the planetary level’. Indeed, the Carlyle Group came to ‘incarnate the military-industrial complex’. Carlucci brought in George Bush senior, John Major, James Baker, Caspar Weinberger and others as highly remunerated advisers and even gave a job to George Bush junior in 1990. After carefully assessing the future president’s potential, he put him in charge of Caterair, a subsidiary providing in-flight meals for airlines. Needless to say young George was not up to the job and the business went under soon after he resigned.
According to the Carlyle Group’s historian, Dan Briody, in his book The Iron Triangle, under Carlucci it became ‘a towering presence in the world of wealth, power and politics…a company whose history includes ties to CIA cover-ups and secret arms deals, and an astounding trail of corporate cronyism’. After 9/11, it was to be ‘the beneficiary of the largest increase in defence spending in history’. This is the company that New Labour invited to buy part of the Ministry of Defence. This was not some sort of ‘innocent’ business deal, but part of New Labour’s continuing love affair with American imperialism.
Carlucci was to fall victim to Michael Moore’s great documentary film, Fahrenheit 9/11. The bad publicity that the Carlyle Group received from the film actually scared off investors and led to an attempt to lower its profile and to diversify into non-military sectors. Carlucci was replaced as chairman by Louis Gerstner of IBM. There is another interesting relationship between Moore and New Labour: whatever predatory US corporations Moore warns against, in Fahrenheit 9/11 and Sicko, New Labour rushes to embrace them, handing over first part of the Ministry of Defence and now parts of the NHS.
Privatising defence training
QinetiQ today is one of the beneficiaries of one of New Labour’s largest privatisations, the privatisation of military training. It has already taken over the Army’s firing ranges, a contract worth some £5-6 billion over 25 years. Now it leads the Metrix Consortium, that has been charged with implementing New Labour’s Defence Training Rationalisation programme, or privatisation as it should more properly be called. The consortium also includes the giant US company, Raytheon (the world’s largest manufacturer of missiles, cluster bombs and depleted uranium munitions) and, most scandalously, the Open University. It is intended to take over the training, not just of the British Armed Forces, but to become a major player in a world market for privatised military training. The proposed St Athan’s Academy, outside Cardiff, will, the consortium hopes, become a world leader. This privatisation was celebrated by The Sunday Express as ‘one of the biggest and potentially most lucrative private finance initiatives in UK history’. Rhodri Morgan, the leader of the Welsh Labour Party, described it as ‘a red letter day’ for Wales.
Notes
- Moses achieved notoriety when her personal secretary stole £4 million from her, her husband and another Goldman Sachs director. They are so rich they didn’t notice the theft for months. She is a so-called ‘non-dom’. See Dan Newling, ‘Rank hypocrisy: No 10’s rich adviser on poverty gets tax breaks as a non-dom’, The Daily Mail 14 April 2008
John Newsinger’s latest book is The Blood Never Dried: A People’s History of the British Empire.