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Prime Ministerial Statement On F16 Decision



Cabinet has received the Hon Derek Quigley’s independent report on the F-16 lease agreement. We are grateful to Mr Quigley for his very thorough report which works its way through the question of the F-16 arrangement and sets it in the broader context of the unsustainability of the Defence Force's capital expenditure plans.

The government has given a great deal of thought to this issue in the last few weeks, using the information that Mr Quigley has assembled for us and detailed technical information which Treasury officers sent to Washington have provided for us. I want to acknowledge also the considerable help that we have received from the United States Government in seeking clarification of particular points. At all times the United States has been helpful as we have worked our way through the issue.

Mr Quigley made four recommendations, three of which the Government will act on. The fourth recommendation in his report was that the Government should consider approaching the United States Government with a view to renegotiating the current F-16 package to include a smaller number of aircraft. The Government has decided not to take that course. We will be exercising New Zealand’s right to withdraw from the lease arrangement. The United States Government has been informed that we will not be proceeding with the acquisition of replacement strike aircraft at this time.

This has not been an easy decision to take. The arrangements that had been offered to New Zealand by the United States were good ones. They provided a way to address now replacement of our A4 Skyhawk fleet. But the mere existence of a bargain at a sale is not a reason for buying it. Bringing the air strike replacement forward from the low ranking it has had in the Defence Force's re-equipment priorities would have had inevitable consequences for other things which must be done to improve the capability of the Defence Force.

In the end the F-16 arrangement has faltered both because it is not a sufficiently high priority right now and because of the huge pressure on the defence budget.

Mr Quigley suggested that we might obtain fewer aircraft than proposed in the current package of twenty-eight. He also identified other savings which could be made in the training and operating regimes of the air combat force. We will be following up on this second point.

While reducing the numbers of F-16s would have alleviated the immediate funding problem inherent in this acquisition, it would not have removed it. There would still be a significant cost involved in purchasing a smaller number of aircraft. In addition, such a decision would have prejudged the broader question of whether New Zealand should retain an air combat capability. That is a matter the government wants to take more time to address.

It is also a matter on which a range of views have been expressed by National's previous Minister of Defence and its current defence spokesperson. Pages 19 – 21 of the Quigley report cite both Mr Bradford's and Mr Mapp's previous question of the need to retain an air combat capability, in stark contrast to their more recent assertions that an air strike capability is essential.

The key point for the government in making this decision, was not whether the F-16s were a good buy, but whether, given all the other things that have to be done in the Defence Force, replacing our air combat capability was the top priority now. This was, I repeat, not a decision about the future of the air combat capability in the RNZAF. The Skyhawks remain capable for some years to come.

The deployment to East Timor has shown up critical deficiencies in the army and in our naval and air support capability. These deficiencies have been around for a long time and they must be addressed. This government is simply not prepared to send New Zealand service people overseas into areas of threat without the assurance of adequate and reliable equipment. Keeping the peace is an increasingly complex and dangerous business. Peacekeeping forces need to be combat ready and properly equipped.

Mr Quigley’s recommendation to consider leasing a smaller number of F-16s was made on the basis of certain assumptions about the make-up of a balanced force. Those assumptions have not been endorsed by this government. New Zealand cannot afford to do everything in the defence area. We will be doing further work in the coming months on defence policy and priorities.

Prior to the elections and subsequently, Mr Goff, Mr Burton, and I have made it very clear that the government will support the urgent re-equipment of the New Zealand Defence Force. Our priorities will be on the army’s mobility and communications, on air and maritime surveillance, and on naval and air support. It is our firm intention that New Zealand will continue to offer its services to keep the peace in our region and internationally. We will work together with others, including our closest defence partner, Australia, the partners in the Five Power Defence Arrangement and the United States. We will participate in United Nations mandated operations, including those under Chapter VII of the UN Charter. To do this, New Zealand needs to have a properly equipped Defence Force.

We cannot do all the things that need to be done at once. Clear priorities will have to be established based on the needs of the services for the situations they are likely to face. This prioritising exercise was Mr Quigley’s second recommendation. The rising cost of military equipment, driven by technological change and the falling value of the New Zealand dollar, magnifies the task.

Mr Quigley’s report tells us that: “There is no priority-setting mechanism in the NZDF, either within the Services or between them, that effectively and consistently links individual activities or projects to the government’s most pressing national security concerns”.

He concludes that: “The NZDF is now in a parlous fiscal position. The pressure is most acute in the capital plan area with a capital expenditure requirement over the next ten years of more than $5 billion. This figure contrasts with the 20-year capital estimate of $4.4 billion made in the 1997 Defence Assessment”.

We are not alone in facing these problems. The Australian Prime Minister told me earlier this month that Australia too is facing challenges in matching needs and resources. The Australian answer may be different from what ours ultimately is, but the importance of close trans-Tasman co-operation on defence issues and the inter-operability of our defence forces will remain central to the establishment of our own priorities. Clearly, our defence relationship with Australia remains our most important defence relationship. We shall be keeping in close touch with Australia as we take this process forward.

Our decision not to proceed with the F-16 purchase is based squarely on our assessment that there are higher priorities for the defence budget right now. As the government is taking a number of initiatives across a range of domestic portfolios, there simply is not the money around for unprogrammed new initiatives in the defence area. In the 1997 Defence Assessment, the previous government set out plans for defence purchasing, but did not make actual provision for the expenditure required. There have been no additional funds provided to defence over the last three years and no forward provision was made in the last government’s budget process. The 1997 Defence Assessment suggestions were already unaffordable before the previous government entered into the opportunity acquisition of the F-16s.

We intend taking up Mr Quigley’s third recommendation to take action on the National Real Estate Consolidation Strategy and in that process to liberate what funds we can for defence acquisition. Once these figures are known against identified priority needs, Cabinet will identify precisely what additional funds can be made available, and over what time frame, for the most important replacement acquisitions.

Mr Quigley’s fourth recommendation related to the nature of funding major acquisitions in defence. This was the subject of a report in 1991 by the Hon Jim McClay. We will revisit the recommendations made in that report and see what action should be taken.

Once again I thank Mr Quigley for his thorough report which has been of huge assistance to the government in coming to a decision on this vexed issue.


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