13.1 |
Resources
112.
Mr Blair,
Mr Straw, Mr Hoon and Adm Boyce met on 17 October to
discuss military
options.82
Mr Rycroft
recorded that Mr Blair acknowledged the arguments in favour
of
Package 3,
but:
“… remained
concerned about costs. He concluded that he wanted to keep open
the
option of
Package 3. But we must not commit to it at this
stage.”
113.
Mr Campbell
wrote in his diaries that at that meeting, Mr Blair said “it
was not no,
but it was
not yet yes, and he wanted more work done analysing the
cost”.83
114.
On 22 October
Mr Jon Cunliffe, Treasury Managing Director for
Macroeconomic
Policy and
International Finance, sent Mr Brown a paper on the risks to
the Treasury’s
objectives
arising from a war in Iraq.84
Mr Cunliffe
identified nine main risks and
assessed
the likelihood and impact of each in four scenarios: no war; a
short war;
a protracted
war; and a war involving weapons of mass destruction
(WMD).
115.
The nine main
risks were:
•
a
substantial rise in public spending;
•
lower
growth, higher inflation and unemployment;
•
negative
productivity shock;
•
public
finances less sound;
•
inflation
deviates from target;
•
loss of
insurance capacity/risk of insurance failures;
•
more IMF
lending leading to higher UK gross debt;
•
revival of
popular pressure for lower fuel taxes; and
•
developing
countries knocked by oil prices, leading to lower
growth.
116.
On public
spending, Mr Cunliffe assessed that indirect costs could more
than
double the
direct costs. In the protracted war and WMD scenarios, the impact
of a
worsening
economy on AME could match the military costs.
117.
In his
covering minute, Mr Cunliffe advised that the Treasury’s main
concern
related to
its “ability to maintain sound public finances, especially in the
more pessimistic
cases”.
There would be some risk to the “Golden Rule” in all three war
scenarios; the
risk would
be much greater if a war involved WMD. Mr Cunliffe concluded
by suggesting
that
Mr Brown might want to warn colleagues about the risk to
public finances.
118.
Section 6.1
describes the growing pressure from the MOD to offer Package 3
to
the US for
planning purposes.
82
Letter
Rycroft to Watkins, 17 October 2002, ‘Iraq: UK
Military Options’.
83
Campbell A
& Hagerty B. The
Alastair Campbell Diaries.
Volume 4.
The Burden of Power: Countdown to
Iraq.
Hutchinson,
2012.
84
Minute
Cunliffe to Chancellor, 22 October 2002, ‘Iraqi War: Risks to
Treasury Objectives’ attaching Paper
Treasury,
[undated], ‘Impact of a War on Treasury Business’.
463