Sir David Davis calls for close scrutiny of BAE merger

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Today Sir David Davis called on the Defence Select Committee to examine the role played by Cabinet Secretary Jeremy Heywood in the proposed merger between BAE and European civil aviation firm EADS.

If it goes ahead, the deal would see Britain’s biggest defence firm fall partly under the control of the French and German governments, which own shares in EADS.

Sir Jeremy’s role has raised eyebrows since he worked for four years at Morgan Stanley, the investment bank advising BAE Systems on the £28billion merger with the Franco-German firm. He has held four private meetings with BAE over the last 15 months, plus two with Morgan Stanley and another with EADS – which will control 60 per cent of the new firm.

Mr Davis said it was “highly unusual” for such a senior official to be involved in the detail of an industrial deal and that it “would be a good idea” for Sir Jeremy to give evidence to the select committee.

“You can imagine senior staff in the Department of Business and the Ministry of Defence taking an interest but quite why the Cabinet Secretary is involved, I’m not at all sure. It’s not something that’s within his purview” Mr Davis explained.

He added “I’m sure he’s been utterly proper and obeyed all the rules but the worry is that the judge of whether a civil servant has behaved appropriately is the Cabinet Secretary himself. It would have made more sense if he had delegated to other officials.”

MPs on the Defence Select Committee say they are seeking to call senior officials from Downing Street and the Ministry of Defence to give evidence about the deal.

 
Yesterday Deputy Prime Minister Nick Clegg backed the deal, saying it would further the cause of European defence integration. He said ‘The two companies are making a case, a strong case, in favour of this merger. I personally have always been in favour, over time, of greater consolidation in the European defence industry.’

Senior officials have already revealed that David Cameron is backing the bid as long as he receives reassurances that it will not damage relations with the Americans, who are concerned military secrets will be compromised.

And Business Secretary Vince Cable has no objection in principle, telling a Lib Dem fringe meeting on Monday he didn’t ‘worry about foreign ownership’ of British companies.

Sir David Davis said: “They shouldn’t be briefing anything until the bid has been through the proper process. This calls for cool, measured judgment first and activity later, not the other way around.”

He added: “It’s very hard to see the French allowing their primary defence company to fall into foreign ownership. This is very old-fashioned industrial politics, the idea that you bring big companies together to make even bigger companies. It has been a proven fallacy since the days of British Leyland.”

A spokesman for the Cabinet Secretary insisted it was ‘standard practice’ for him to show an interest in a deal involving a major government contractor like BAE.

He added: ‘He is not the lead official on this, his role is no different from the role he plays on other major issues requiring high level ministerial involvement and coordination across departments.’