Appendix: The Price of Victory According to official estimates and public statements, the War itself cost f800 million, replacement of eqmpment lost during the campaign cost f1172 million and the total capital costs incurred since 1982 have amounted to f2005 million (Figure A.2). The additional postwar defence costs will amount to almost B.6 billion over ten years (Figure A.1). A large amount of this expenditure has already been spent or committed, not only on the replacement of equipment but also on the building of a new strategic airfield at Mount Pleasant, 20 miles from Port Stanley, on the development of a military base, also at Mount Pleasant, to house the Islands' garrison, and on the related infrastructure facilities such as roads (almost non-existent outside the Islands' capital) and docks required for these developments (Figure A.1). But large capital expenditures remain outstanding together with the large running costs of the garrison. The postwar economic aid programme, including immediate rehabilitation and compensation of civilian losses and a six-year development plan, but excluding longer-term claims for compensation from the Islanders, totalled f51 million (Figure A.3). By 1992, therefore, the total expenditure on the War, on Fortress Falklands and on the economic aid extended to the Islands since 1982 will amount to at least f4.5 billion (Figure A.4, 1983-84 average prices). But this figure is almost certainly a large underestimate of the final cost which for various reasons is likely to be weil in excess of f5 billion. The f4.5 billion figure, for example, excludes a number of additional items of expenditure for which figures are not currently available or are difficult to estimate. These include the increased rates of depreciation and the opportunity costs of aircraft, ships and other equipment deployed in the South Atlantic and in the maintenance of the air bridge to the Falklands. Reduction of running costs afforded by the new airport are estimated to be in the region of f25-BO million per annum but these have to be set against the very high capital cost of its construction and the high level of running costs wh ich are nevertheless projected for the future. Royal Navy submarines, Frigates, Destroyers, Patrol Vessels, Royal Fleet Auxiliaries and ships taken up from trade (STUFT) are all engaged in the South AtIantic. Although the MOD claims that the meantime at sea and the usage of the ships operating off the Falklands will be of the same order as if the Falklands commitment did not exi!it, it has been reported that four Frigates/Destroyers are normallyon station there. Despite the opening of the new airport on 12 May 1985, it has been estimated that in all a total of 15 naval vesseIs are involved in patrolling and keeping the Islands supplied. That means that the Frigate/Destroyer commitment alone represents about 10 per cent of Britain's operationally available FrigatelDestroyer strength. Between 1982 and 1985 the RAF Hercules aircraft and air tankers operating the air bridge between Ascension and the Islands were f1ying at about 30 per 237 N TOTAL I.;.l TEN YEAR 00 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 DEFENCE CaST 1. GARRISON (b) (b) (b) 150 150 150 150 150 150 COSTS 233.2 183.7 127.6 150 2. INFRASTRUCTURE AND OTHER (b) (b) (b) CAPITAL COSTS 190.8 150.3 104.4 i (c) ) (d) i (d) 300- 150-t-119.75- t119.75 ~ ~ t' '0' , 3. ~ EQUIPMENT ;:~ REPLACEMENT >:l.. etc. 200 350 320 ~. TOTALS 624 684 552 450 300 269.75 269.75 150 150 150 3599.5 SOURCES: (a) Statement on the Defence Estimates /983. Cmnd 8951-1; Statement on the Defence Estimates 1984. Cmnd 9227-1; House of Commons Third Report from the Defence Committec. Session 1982-83. The Future Defenee 0/ the Falk/and Islands. HC154. 1983; House of Commons Third Report from the Dcfcnce Committec. Session 1984-88. Defence Commitments and Resources and The Defence Estimates 1985-6. HC37-1-II-1I1. Annual funning costs for the garrison were first given as bctwccn fl75 million and {2oo million. but the official figure is now flSO million lall figures average 1983-84 prices). (h) Thc figures tOT cost catcgorics land 2 were calculated in the following way. The MOD explained to the Commons Defence Committee (HCI54) that the combined figure for these categories in each of the ycars specified (l98J-84. 1984-85. 1985-86) was i424 million. f334 million. and f232 million respectively. The c.pital cost was said to be about 45 per cent of these sums. That percentage has been applied hcrc to givc thc figures in the ablc. (c) t:.stlmate bascd upon subtraction of annual running costs from total figure for the year given by the MOD in HC37-1. p. xxxi. para. 81(f). (d) Estimatc hased upon dividing the sum outstanding from a total capital cost of :U980 million (He37-1. p. xxix) equally between the following two years. FIGURE A.I Falklands Expenditure: Additional Postwar Delenee Costs. 1983-!34 to 1992-93") Appendix 239 REPLACEMENT OF EOUIPMENT COST ((m) 4 Type 22 Frigates (including costs of running on ships to maintain numbers during construction period) 705 Equipping and fitting of 4 Type 22 Frigates 132 Logistic landing ships 46 Aircraft (including: 12 PHANTOM F4Js; 5 CHINOOK Helicopters;6 SEA KING ASW helicopters; and 7 SEA HARRIERS) 108 Weapons and ammunition stores (including 24 additional RAPI E R fire units) 53 Other items (spares, support etc.) 128 SUB·TOTAL 1172 NEW FALKLANDS AIRFIELD OTHER WORKS (including Ascension Island) NEW EOUIPMENT (including 6 wide·bodied TR I·STAR jets for tanker and transport roles) 265 OTHER ITEMS (spares, support etc.) 128 TOTAL 2005 SOURCES: (a) Average 1983-84 prices unless specified otherwise. Cost details taken from HC37-1, unless a different source is quoted. Details of weapon purehases are taken from The Falklands Campaign: The Lessons, Cmnd.8758, 1982. (b) This figure is the revised July 1984 cost estimate given by the Property Services Agency wh ich is the Department responsible for meeting the MOD's requirements for major works in the Falklands. It was reported and discussed in the National Audit Report by the Comptroller and Auditor General, Property Services Agency: Defence Works in the Falkland Islands, HC 31 (13 November 1984), p. 1, para. 2. (c) This figure is taken from HC37-1, p. xxix. However, in an announcement on 21 September 1984 the Government revealed that an additional fl19 million was to be spent to enable the Falklands Garrison to be concentrated at the airport site. It is not cIear whether this f200 million figure refers to these new works or whether an extra fl19 million should be added to the capital cost bill. FIGURE A.2 Falklands Expenditure: Capital Cost Breakdown 240 Appendix ITEM COSTS f (m) IMMEDIATE REHABILITATION AND COMPENSATION OF CIVILIAN LOSSES 15 POSTWAR SIX-YEAR DEVELOPMENT EXPENDITURE PLAN 31 ROAD CONSTRUCTION STANLEY-DARWIN 5 TOTAL 51 FIGURE A.3 Falklands Expenditure: Economic Reconstruction Costs ITEM COSTf (m) WAR COSTS 1982-83 800 ECONOMIC RECONSTRUCTION 51 TEN-YEAR DEFENCE COST (a) CAPITAL COSTS 2005 (b) GARRISON RUNNING COSTS 1594.5 TOTAL 4450.5 (a) Average 1983-84 prices Figure AA Falklands Expenditure: Total Ten- Year Costing. 1982-1993(a) cent higher than normal rates, as were the RAF Sea King helicopters in operation in the South Atlantic. The composition of the Falklands garrison is officially described as one Infantry Battalion Group, together with supporting arms and services including Phantoms, Harriers, Hercules, Chinook and Sea King helieopters, and an RAF Regiment Rapier squadron. Unoffieially the size of the garrison has been put at between 3--400() men. In addition, there is the cost assoeiated with the retention of HMS 1nvincible (at 00 million per annum), whieh was scheduled to be sold to Australia before the War broke out, and of HMS Fearless and 1ntrepid (at f16 million per annum) whieh were scheduled to be serapped. Together these items more than eompensate for the faet that replaeement equipment will last longer and is presumably of a higher quality than that destroyed in the War. Above all the costs of the strategie base in the Falklands have already exeeeded initial estimates, and neither the running costs nor the final eonstruetion eosts ean be fully determined. The MOD estimated that onee the strategie airfield at Mount Pleasant was Appendix 241 completed and the level of forces on the Islands stabilised, the additional annual cost of maintaining the garrison, the Royal Navy and supporting shipping would be between f175 million and f200 million. Subsequently it has revised this figure without explanation down to f150 million. This lower cost has been used in Figure A.l but there must be some doubt about its accuracy, particularly as the garrison is not Iike1y to be operating on a care and maintenance basis until the end of the 1980s. 1 Estimates for the new Falklands airport, in particular, are considerably understated. At the end of July 1982 Ministers decided in principle that a new airfield should be provided to meet the MOD's requirements 'for air defence, troop roulement and rapid reinforcement'. At first it was envisaged that the Army's Royal Engineers would undertake the construction, but in September 1983 the Government's Property Services Agency (PSA) was asked to assume responsibility for planning the works. The Mount Pleasant site was selected by the Royal Engineers in July 1982 but in November, after a detailed survey by a joint MOD/PSA team had produced an initial costing, Ministers asked for an alternative assessment based on the improvement of the existing airfield at Stanley.