Britain's next goal in Falklands conflict: pay its big war bill
As British forces garrison the Falkland Islands and a new South Atlantic era begins, British ministers worry about paying the bills for the war they have just fought.
Latest estimates here put the total cost of the 74-day war at between L1 and L1.5 billion sterling (between $1.75 and $2.64 billion), far higher than the L 200 million ($352 million) originally expected by some government departments.
Much of this sum comes straight from the annual defense budget of around L14 billion. But at least L500 million ($880 million) has been spent outside normal defense budgeting, and the money will have to be found this year, government sources indicate.
Although the government plans to use part of its normal contingency reserve fund of L2.25 billion to meet current bills, the high costs of the war will have two other impacts here, both with domestic political implications:
1. Civilian government departments from housing to health that usually dip into the contingency fund because they overspend will not be able to do so this year. They might have to cut back even further on some programs and services to the public.
2. As senior government figures have already warned, new taxes may well be necessary to raise money quickly. The longer British troops stay, the higher the total cost will be. With the government facing an election in less than two years, any new taxes will be indirect, such as value-added or excise levies. Replacing ships and planes will be spread out over many years.
The Conservatives will almost certainly not be able to lower income taxes before the election, as they had hoped to do. Although Prime Minister Margaret Thatcher is riding high in the polls today after retaking the Falklands, political observers warn that the economy and other issues could drag her down before an election -- and higher taxes would not help her.
It will cost London just under L500 million ($900 million) to replace ship and aircraft losses alone.
Each of the two destroyers lost cost L125 million. Replacing each of the frigates will cost L80 million, and the Atlantic Conveyor container ship L15 million.
Each of the six Sea Harrier jump-jets downed will cost L6 million to replace, and each of the two Air Force Harriers cost L5 million. Added to that are four Gazelle helicopters lost L300,000), two Wessex helicopters (out of production but Lynx replacements could cost L2 million each), four Sea King helicopters L2. 5 million) and one Westland Commando helicopter at L2.5 million.
In addition, chartering 48 civilian ships, including the liners Uganda, Queen Elizabeth 2, and Canberra, is costing about L100,000 ($160,000) per day.
At this writing many of those ships had been under charter for 60 days or more, adding up to a considerable and continuing bill.
Ammunition is also expensive (though some of it would have been fired in routine exercises anyway): L3,000 each for the two torpedos that sank the cruiser General Belgrano, L100,000 for each Sidewinder missile fired by a Harrier jet, L9,000 for every Rapier antiaircraft missile fired at an Argentine plane, L9,000 for every cluster bomb, and L2 for each 30-millimeter cannon shell (thousands can be fired in a minute).
Extra will be the repair and rehabilitation Mrs. Thatcher vows will take place on Port Stanley: lengthening the runway there (from 4,000 to 6,000 feet) to take British Phantom jets and other planes, new buildings, and facilities for a garrison that will outnumber the regular islanders they are to defend by almost two to one. Garrison costs alone could run to several hundred million pounds a year.
Most British people I have talked to since the war began have said they would be willing to pay extra taxes if necessary. ''If I have to pay more to drive my car so that Britain shows it cannot be pushed around, so be it,'' one suburban woman put it. And government officials say the war bill, while large, can be met. The annual defense budget is L14 billion. They concede, however, that other government departments are likely to feel the strain, and some services to the British taxpayer could be curtailed or be made more costly.
The government is relying on its Contingency Reserve Fund to help. The fund now stands at L2.25 billion.
Normally civilian departments draw heavily on that fund to finance cost overruns. Industry, Transport, Environment, Education, and Social Security ministries used the fund last year, spending all but L300 million of it. This year, those ministries will have to pull in their belts, government officials privately agree. The extra money will not be there.
But in annual budget-setting talks that are about to begin for the budget of next spring, ministers will be fighting for undiminished shares of government revenue. Taxes may have to rise to accommodate them and the bills for the war.
Mrs. Thatcher has tried hard to hold down government spending since her election in May 1979 as part of her monetarist approach to reducing inflation.
With inflation falling toward the single digits and faint signs of an upturn in business confidence and activity, she is said to be determined not to resort to inflationary borrowing for the Falklands war or any project.
This is particularly true at a time when nationalized industries such as steel, cars, coal, and rail are still incurring enormous losses and requiring far more government financing than the prime minister favors.
So the war loans of World War I will not return. More likely is the strategy of World War II, when personal income tax exemptions were reduced. (Taxpayers were promised a ''postwar credit.'' Until 1978, the credit was paid only when individuals retired. In that year the remainder was paid out.)
An extra penny in the pound of straight income tax would raise L1 billion a year, officials say, but Mrs. Thatcher is most unlikely to raise taxes with an election coming. If she raises indirect, valued-added taxes by 1 percent from their current 15 percent level, she could bring in an extra L640 million. FALKLAND LOSSES Figures are based on British Defense Ministry reports and are unconfirmed by Argentina BRITAIN ARGENTINA Casualties: 205 (appox.) Casualties: 800 (approx.) including including 43 Attack on landing 321 on General Belgrano ship Sir Galahad 250 defending Port Darwin 22 on HMS Ardent and Goose Green 21 on HMS Coventry 65 Airmen 20 on HMS Sheffield 50 during firefights 12 on HMS Atlantic around Stanley 2 on HMS Antelope 17 during recapture of Port Darwin and Goose Green Ships: 5 Ships: 5 2 destroyers: HMS Coventry 1 cruiser: General & HMS Sheffield Belgrano 2 frigates: HMS Ardent 1 supply ship: Isla de & HMS Antelope los Estados 1 merchant ship: Atlantic 1 submarine: Santa Fe Conveyor 1 patrol boat 1 fishing trawler: Narwal Planes: 8 Planes: 68 8 Harriers including 24 Mirages 23 Skyhawks 7 Pucaras 1 Canberra 1 C-130 Hercules supply plane Helicopters: 11 Helicopters: 9 Chart by Joan Forbes, staff cartographer