Pound's fall could affect plans for defence investment says Amber Rudd
The fall in the pound following the Brexit vote could affect the Government's plans to buy new ships, aircraft and other defence equipment unless the currency recovers, the Home Secretary has said.
Amber Rudd said ministers have "hedged" for a drop in sterling for two years but admitted if it does not recover from an 18% drop against the dollar and 10% against the euro after that period, planned defence investment could go over budget.
She spoke as parliamentarians raised concerns over the Government's ability to deliver on its proposals for a new Joint Force 2025, which includes plans to buy new F35 Lightning aircraft, logistics ships, as well as a host of other investment commitments.
Ms Rudd, who chairs the Cabinet committee on implementing the Strategic Defence and Security Review 2015, which includes the Joint Force 2025 plans, was questioned on the issue of currency by Foreign Affairs Committee chairman Crispin Blunt.
At Parliament's Joint Committee on the National Security Strategy, Mr Blunt said: "In the delivery of the Vanguard (submarine) programme in the 1990s, the programme was rescued in terms of assessment by the National Audit Office, in terms of financing, because of the movement of currency that helped (it become the) only one out of 25 major programmes they looked at in memory that actually came in under budget.
"But currency is going in the other direction now and it would certainly seem on the data provided to this committee and others, that currency fluctuation is blowing your assumptions about what you are actually going to have to pay for actual kit out of the water."
Ms Rudd replied: "This is an important issue and it is one I have raised.
"The Defence Secretary will reassure us that they have hedged for a period and you would expect them to, so it won't impact immediately, and of course we don't know where the currency will be in two years time.
"But it is something that we are very aware of and could impact after two years if it's in the same place, if we have a situation where our purchasing power is down by 15%, it will have an impact, you are right Mr Blunt.
"But at the moment the situation is that it is hedged for a period."
Asked how long the "hedge" was for, she said: "For two years."
She added: "None of us know what the currency will be like after two years but I accept your point, which is that it could impact on our ability to purchase given the certain amount of money that's been committed to this and there might have to be conversations with the Chancellor at that stage."