£2.6bn for 'unbreakable' ship deal

Under a 15-year agreement signed with BAE Systems, the last government guaranteed work for the company's shipyards on the River Clyde and in Portsmouth, The Times has reported. This included the £5.2 billion contract to build two new aircraft carriers for the Royal Navy, which Prime Minister David Cameron said this week he was unable to cancel.

When the coalition looked at axing one of the carriers to save money, BAE responded that the Government would still have to pay shipworkers to do nothing for the remaining 12 years of the deal, the newspaper said.

However, at no point did Mr Cameron's ministers seek to renegotiate the shipbuilding agreement, according to the company, the newspaper added.

It quoted chief executive Ian King as saying: "This was an agreement entered into by consenting adults. I stated why the contract had been signed, what they were getting and the objective and that it was very important strategically and to our industrial capability."

Mr Cameron said this week while announcing the outcome of the Strategic Defence and Security Review (SDSR) that the "appalling legacy" of the previous Labour government meant it would be more expensive to cancel the second ship than to build it.

While both will now go ahead, although there will be no aircraft to fly from them for 10 years, one will be put on "extended readiness" - effectively mothballed - and may be sold off.

The newspaper said BAE had signed a draft terms of business agreement three years ago that would cover 15 years of unspecified shipbuilding work, and the contract was signed officially last year. The agreement would let BAE hold on to skilled workers and maintain the UK capability to build warships. But defence industry insiders believe Labour ministers had a political motive for a deal that would protect shipbuilding jobs in the party's heartlands, the newspaper said.

A Ministry of Defence spokeswoman said: "The whole question of the liabilities that might arise as a result of contractual liabilities entered into by the previous government was considered in great detail during the SDSR.

Nobody at BAE Systems was available to comment.