8. The United Kingdom and the United States have a long history of collaboration on major defence projects.[13] Collaboration on various aspects of the United Kingdom's nuclear deterrent programmes has taken place under the auspices of the 1958 Agreement for Cooperation on the Uses of Atomic Energy for Mutual Defence Purposes and the 1968 Polaris Sales Agreement.[14]

9. In an exchange of letters in 2006, the Prime Minister and the President of the United States agreed that the United Kingdom would participate in the planned life extension programme for the Trident D5 missile and that close coordination should be maintained between the two countries. The United States has also agreed that any successor to the Trident D5 missile would be compatible with, or be capable of being made compatible with, the launch system that the United Kingdom will be installing into its new submarines.[15]

10. Despite these assurances, collaboration with the United States on the Trident D5 missile life extension programme presents significant risks to the United Kingdom's future nuclear deterrent. The new class of submarine is likely to remain in service beyond the extended life of the existing Trident D5 missile, which will be renewed in 2042, and must therefore be compatible with any successor missile developed by the United States.[16] Lack of coordination between the United States' missile design and the United Kingdom's future submarine design may cause the missile compartment to be incompatible with the extended D5 missile design. Any form of dislocation or delay in this collaboration process would have serious ramifications for the Department's ability to support a nuclear deterrent over the longer term.

11. The Department understands that there is a significant risk associated with being ahead of the United States. By seeking to have a shared design for its missile compartment, the Department has taken steps to reduce the risk of future incompatibility and is working with the United States to mitigate the immediate D5 missile compatibility risk.[17]

12. There is a general risk that wider political or economic factors could lead the United States Government to delay or even cancel their submarine construction programmes. Whilst unlikely, such an event would impose substantial costs on the United Kingdom if the Department chose to continue with its submarine programme without the assistance of the United States.[18]

13. This programme, like others with international collaboration elements, is subject to exchange rate variations: in this case between the pound and the dollar. Given the long timelines involved, large exchange rate fluctuations could have a significant impact on the budget. In the short term, the Department has a rolling programme to buy foreign currency forward, which is intended to mitigate the risk over a three-year period. When the Department was calculating the costs of the collaborative elements of the programme, the United States dollar exchange rate was 1.82.[19] If the dollar remained at the level it reached in November 2008, the Department calculated that the additional costs to the future deterrent programme would amount to around £300 million.[20]

14. Close collaboration and ongoing discussions with the United States therefore remain critical to the successful delivery of the United Kingdom's future deterrent. The Department is confident that several factors, including the 1968 Polaris agreement, the exchange of letters between the Prime Minister and the President, and the current high levels of cooperation between the two countries provide reasonable assurance that it is doing what it can to mitigate the risk.[21] The Department is also designing a communications plan to ensure that the United States receives consistent messages from its various teams.[22]

14   Q 27; C&AG's Report, para 1.12 Back

15   Qq 5-6, 82 Back

16   C&AG's Report, para 2.12 Back

17   Q 27 Back

18   Q 44 Back

19   Q 28 Back

20   Q 29 Back

21   Q 82 Back

22   C&AG's Report, para 3.24 Back