Aircraft carrier contract renegotiated as costs soar

Chair of public accounts committee describes doubling of estimated cost to £6bn as ‘really depressing bit of news’

The latest estimated cost of building two large aircraft carriers for the navy has almost doubled to more than £6bn and total expenditure on the project will be at least £11bn, it has emerged.

The government is so concerned about the soaring cost that the Ministry of Defence is renegotiating the contract. Talks were “close to reaching a conclusion”, Philip Hammond, the defence secretary, told MPs on Monday. The government wants future cost overruns split 50-50 between the government and the ships’ builders instead of the 90% now being paid by taxpayers.

Margaret Hodge, chair of the Commons public accounts committee (PAC), described the latest cost increase as “a really depressing bit of news”. In a report last month the PAC described the carriers’ contract with companies led by BAE Systems as not fit for purpose.

Yet Hodge also pointed to the soaring costs of the American F-35B aircraft that are due to fly off the carriers from the end of the decade. The planes, the most expensive weapons system in history, are currently estimated to cost £100m each, but the project continues to be hit by technical and labour problems in the US. The MoD has said it wants to buy at least 48 – at a cost of £4.8bn – but no final decision will be taken until after the general election in 2015.

“Britain’s ability to control these costs is very limited,” Hodge said. Senior defence officials have described the costs as “commercially sensitive data provided by the US Department of Defence and … not publicly releasable”.

Technical problems surrounding the Short Takeoff/Vertical Landing (STOVL) version of the aircraft range from the weight to cockpit design affecting pilot visibility. The latest cost increase is the result of having to strengthen the decks of the carriers.

The MoD abandoned the original plan to build carriers with catapults and arrester gear – cats and traps – on grounds of cost even though it originally described that version as the advantage over the STOVL version, notably a “longer range and greater payload … the critical requirement for precision-strike operations in the future”.

The first of the carriers, Queen Elizabeth, is due to begin sea trials towards the end of the decade. A decision will not be taken until 2015 about whether the second carrier, Prince of Wales, will ever be operational, Hammond said on Monday. It could be sold off, or moth-balled. Navy sources have said the ships – originally estimated to cost £3.5bn and which will now cost at least £6.2bn – being built in Scottish yards, could be used as platforms for pilotless drones or helicopters.

The PAC warned last month there was also a two-year gap between the first carrier’s projected initial operations and the establishment of the early warning radar system, Crowsnest, which is essential to protect the ship and its crew.

Shadow defence secretary Vernon Coaker said on Monday: “The defence secretary’s claim that he has balanced …read more