Killing F-16 deal risks allies' anger

By JOHN ARMSTRONG political editor

The Coalition cabinet is on a collision course with Canberra and Washington after Prime Minister Helen Clark signalled that budget pressures could force cancellation of the deal to lease F-16 jet fighters.

Officials advised the first meeting of the new cabinet yesterday that the Defence Force was unable to meet all its existing re-equipment commitments from its budget.

Refusing to disclose details provided to ministers, Helen Clark said the Coalition simply did not have the money for any "radical" increase in spending.

Removing the F-16s could help the Defence Force to meet other priorities, such as new Hercules transport planes.

"We'd need to take advice on that. That could be enough."

Her comments indicate her determination to review the contract, which was signed in July by the minority National Government despite her strong opposition.

Pointing to the basic hire cost of $12.5 million a year, National described the 10-year lease of the 28 near-new but mothballed aircraft from the United States as the "deal of the century" and affordable within existing defence spending.

But Helen Clark was more worried by the all-up bill for the fighters, which are due to be delivered in 2001 as replacements for the Air Force's ageing Skyhawks. That amounts to well over $700 million, once spares, training, refurbishing, equipment upgrades and the option of outright purchase are taken into account.

She said yesterday that the cabinet had not been advised of any penalty clause in the contract, although costs incurred during the six-month notice required for cancellation of the contract would have to be paid.

Parliamentary papers show the Government would also have to pay costs associated with terminating contracts awarded by the United States Government relating to training, spares and support equipment.

Senior Defence sources told the Herald before the election that contractual obligations already amounted to $70 million to $100 million.

Helen Clark's remarks coincided with the arrival in Wellington yesterday of the new United States Ambassador, Carol Moseley-Braun. The embassy said she was "settling in" and was not yet available for interviews.

However, National cabinet ministers were told last year that the deal would bolster strained relations with the Pentagon.

Cancellation would go down equally badly with Australia, which has frequently questioned the level of New Zealand's defence spending.

The cabinet is now finalising the terms of reference for an independent review of the contract to be conducted by former Act MP Derek Quigley by March. As chairman of Parliament's foreign affairs and defence committee, he oversaw a contentious report that questioned the need for the strike aircraft.

The Prime Minister also confirmed that she would initiate a major review of defence policy. She did not elaborate, but a white paper would probably canvass the necessity of the Air Force's combat capability once the Skyhawks are taken out of service during the next decade.

A decision against the F-16s risks being seen in Canberra as a signal that the Labour-Alliance Government would substantially pull New Zealand out of regional defence, if not by intent then for lack of equipment and skills.

Like the Skyhawks, some of the F-16s were expected to be stationed in Australia as part of the closer defence relations arrangement with Canberra.

But Helen Clark doubted whether relations would be affected as long as the defence budget was not slashed.

"We are talking about how a small nation with a limited amount of money best uses its money."

Related Links:

Ministry of Defense (www.defence.govt.nz/default.html)

The Royal New Zealand Air Force (www.airforce.mil.nz)

F-16 jet fighters (www.f-16.net)

The Labour Party (www.labour.org.nz)