Tuesday, 24 July 2012

Down to the nitty-gritty - Part 3: A divorce settlement for the Scots Navy


Scotland is being offered £3.7bn assets - Navy could have £1bn worth of vessels
Defence Minister Peter Luff recently suggested Scotland would be entitled to £3.7bn of MoD assets in the event of independence. 

What could be the provenance of the figure, and what would it mean in practical terms for Scotland?

The National Asset Register 2007 listed £93bn as tangible (£70bn "things" such as land, buildings, weapons) and £23bn intangible (R&D spend to develop weapons) as MoD assets. £3.7bn equates to 8.4% of the moveable portion of these* - vehicles, ships and aircraft. This seems reasonable - after all even if we wanted to give up Faslane (value £260m , or Couplort value £2m) we obviously can't move them across the border. 

When Russia and the Ukraine separated with the end of the Soviet Union, they eventually split the Black Sea Fleet (based on Ukrainian sovereign territory) 50/50 by number of units, with Russia "buying back" units assigned to Ukraine that they wanted to keep for operational reasons. 

There are clear parallels with Scotland's situation - the most obvious example being the Trident nuclear missile submarines, built for £4.8bn in the 1990s and valued at £2bn in 2005 - and of no value to Scotland. 

Before jumping to the answer for a possible split of units, or cash in hand, let's look at the actuarial issues. 
  • The 2007 National Asset Register uses 2005 figures - we need to use 2014 values for assets
  • However the depreciation scheme for the 2007 Asset Register is not disclosed, so 2014 values have been estimated based on:
    • historical purchase cost, unadjusted for inflation (Historical Cost Accounting - "HCA")
    • estimated asset life with straight-line depreciation
    • HCA values for 2005 have been compared against the National Asset Register
  • Resale values have also been shown, where comparators are available
The full table of estimates and values by asset can be viewed here:

The quick answer is that the valuation of the RN's vessels attributable to Scotland's Navy should be of the order of £1bn at independence. 

The Scots Navy could take 14 vessels of different types, and still have £400m cash in hand - mainly thanks to the six eye-wateringly expensive Type 45 destroyers and the two Astute submarines in service by 2014, all eight vessels around £1bn each - and none of which we want. 

What ships would the Scottish Navy spend £1bn on?
Previously we sized the Scottish Navy at 9 patrol vessels, with the option to run 10 new generation Calmac ferries as dual role ships, as was first done in the 1960s. 

The previous post considered ranges and operating areas only, not functions. However our patrol vessels should have space for hangar for a helicopter (ideally Chinook-sized), accommodation for soldiers and ideally a vehicle ramp and deck. Such a utility vessel can "do anything" we would reasonably expect. Built as new, a simple helicopter-capable ship could cost in the order of £50-60m - examples are the New Zealand Protector class or the Norwegian Svalbard class. To add space for vehicles, indeed for a hangar for two helicopters is just that - space surrounded by steel, and relatively cheap. New Zealand bought the Canterbury for £85m  - but the Australians got an even better bargain. 

The closest approximation within the RN's current inventory to a ship for soldiers, their vehicles and as a base for helicopters are the Bay class landing ships. These cost £165m when new - but Australia bought a 5-year old one for £65m

Bay-class [bottom] alongside cruise liner [top] for comparison

Here is the list of 14 vessels we could negotiate for:

Intervention ships
  • Bay-class x 2 [leaving RN 4 other landing ships]
  • Frigate x 2 [leaving RN 17 other escorts]
  • Supply ship x 1
Patrol vessels
  • Minewarfare x 6 [doubles as a stop-gap for new build patrol vessels, leaves RN 9]
  • Patrol vessel x 2 [leaving RN 3]
  • Survey vessel x 1 [leaving RN 3]
Effectively we get our 9 home patrol vessels and an intervention force to contribute to multi-national efforts as anticipated by the SNP

Knowing that the balance of asset values can allow us to negotiate for the ships we need, then helicopters and fast jets for maritime strike and air defence for the Scots Navy can be drawn from the pool of existing UK assets on a proportional basis to population (25 helicopters and 18 fast jets) 

Independence "So Whats?"
1. Scotland can negotiate for nine patrol vessels and fiveintervention ships from RN

2. Up to £400m trade-in value of other vessels to allow us to acquire maritime patrol aircraft (RN has none today)
3. Sufficient fast jets for Scots Navy to defend national perimeter and helicopter fleet for patrol and intervention can be available from a proportional split of UK assets. 

* "Single use military equipment", "Transport equipment" and a portion of ""Assets under construction"


  1. This is the first of these blogs that I have read and I am impressed partly because the basis of the estimates are given and partly because it shows an in-depth knowlege that I don`t have. It also provides a realistic scenario.

  2. Do you think the Royal Navy are going to give you 40% of both their Mine Hunters and OPV force? No