13.1 |
Resources
70.
A further
minute from Mr Watkins stated that, at their 5 September
meeting,
Mr Hoon
and Mr Brown had agreed to “meet periodically … so that
Mr Hoon could keep
Mr Brown
in touch with our emerging thinking on the options for UK
involvement in any
military
action and the implications for UORs”.60
71.
On 6
September, a Treasury official sent Mr Brown a paper on the
global, regional
and local
(Iraqi) economic impact of war in Iraq.61
The paper
advised that, globally, a
conflict
could lead to a rise in the oil price of US$10 a barrel and a
consequent reduction
in global
growth by 0.5 percentage points and a rise in inflation of between
0.4 and
0.8 percentage
points. The paper did not consider the impact of a war on the
UK
economy.
72.
The paper also
considered Iraq’s post‑war needs. That analysis is described later
in
this
Section.
73.
The Inquiry
has seen no indication that Mr Brown responded to the
paper.
74.
On 16
September, a Treasury official produced an analysis for Mr Ed
Balls (Special
Adviser to
Mr Brown), at Mr Balls’ request, on the implications of
military action in Iraq
for UK
public spending.62
The
official suggested that a “central estimate” of the cost
of
“military
action” might be £2.5bn, although that could rise considerably if
the campaign
was
protracted or a large‑scale occupation was required. The official
also suggested
that the
cost of reconstruction was likely to be in the order of US$9bn, in
addition to
International
Monetary Fund (IMF) and peacekeeping costs.
75.
The official
continued:
“…
the wider
economic impact of conflict could be very significant
…
[R]
educed
economic growth would hit … revenues … and would feed through to
higher
AME
forecasts.
“… this
year’s Reserve is already heavily overcommitted. There is a very
real risk
that we
will breach the DEL limit …
“In summary
… military action is very likely to constrain our TME [Total
Managed
Expenditure]
and fiscal flexibility over this and possibly the next financial
year.”
76.
The analysis
was also sent to the Private Offices of Mr Brown and
Mr Paul Boateng,
the Chief
Secretary to the Treasury.
60
Minute
Watkins to DG RP, 18 September 2002, ‘Iraq: Meeting with the
Chancellor: 23 September’.
61
Email
Treasury [junior official] to Bowman, 6 September 2002, ‘What Would
be the Economic Impact
of a
War in Iraq?’ attaching
Paper Treasury, September 2002, ‘What Would be the Economic Impact
of
War in
Iraq?’.
62
Minute
Treasury [junior official] to Balls, 16 September 2002,
[untitled].
457