Defence review: decision to build new aircraft carriers made in Labour's 1998 Strategic Defence Review

Few observers challenged the strategic decision itself, but it was a decision that was followed by a 12-year saga of delay, overspend and acrimony.

Almost immediately, acrimonious rows broke out between the Ministry of Defence and companies bidding to build the new ships. Only in 2003 did the MoD finally decide that a formal alliance of BAE Systems and Thales would build the carriers, a political fudge that meant there were two “prime contractors”.

Still, the MoD, then run by Geoff Hoon, stuck to the forecast that the carriers would cost £3 billion in all, and arrive in 2012 and 2014.

Repeated leaks from the contractors suggested those estimates were wildly optimistic. Journalists, MPs and experts suggested the cost would ultimately exceed £4 billion.

But officials rubbished those reports.

Sir Peter Spencer, the former Navy officer serving as head of Defence Procurement told the Commons Defence Committee in 2004, the MoD was confident of the £3 billion figure because “we have very good metrics, independently verified, of what we know this carrier can be built for.”

Almost from the start of the procurement – one of the largest in British military history – another major question was over what would fly from them. Labour provisionally decided to order a special jump-jet variant of the planned US-built Joint Strike Fighter.

Ordering a jump-jet meant the new carriers could be designed with a shorter runway.

Yet this was always a controversial decision, as experts and some Navy officers raised doubts about the jump-jet JSF’s military value. There were also doubts about the ability of the US defence industry to deliver the new plane on time.

So in 2002, Labour partially hedged its bet. BAE Systems and Thales were told to work on a runway design that could ultimately be adapted for conventional long take-off aircraft types.

In December 2005, the Commons Defence Committee chaired by Tory MP James Arbuthnot sounded the first real parliamentary alarm over the project, reporting “a serious risk” that the carriers would enter service later than originally planned.

Critically, the MPs also noted that because of the delays in the US project to build the new Joint Strike Fighters due to fly from the carriers, “there is likely to be a capability gap” for the Navy.

The “Main Gate” decision, formally placing the contracts for the carriers was expected in February 2004.

Because of rows between officials and contractors, it did not happen until July 2007, when Des Browne, the defence secretary, finally confirmed that the carriers would go ahead, after a thorough review of the plans by Sir John Parker, a respected industrialist.

And confirming Scotland’s importance to Labour ministers, two of the four sections in each ship were to be built north of the Border: the Babcock yard at Rosyth, Fife was asked to build the sterns and the BAE yard on the Clyde to make the bow sections.

The ships’ height was evern reduced by its French designers so they could sail out to sea under the Forth Rail Bridge from the Fife yard where they would eventually be welded together.

At the same time, ministers finally admitted the delivery dates for the carriers had slipped to 2014 and 2016. They also slipped out an announcement about the defence budget as a whole for the following year, showing defence spending was to be reduced again.

In December 2008, John Hutton, then the Defence Secretary, announced that the carriers would be further delayed, claiming that was to align their arrival with that of the JSFs they were to carry.

Yet in February 2009, Admiral Jonathan Band, then the head of the Navy, dismissed that explanation, saying the carriers were delayed because “our budget is under pressure.”

But if delays were meant to save money, it was only a short-term saving.

A National Audit Office inquiry later found that the delays ordered in 2008 would add £674 million to the final cost of the carriers.

Yet in late 2009, Bob Ainsworth, then the defence secretary, ordered another delay. That added another £908 million to the cost, finally pushing it to £6 billion.

When the Coalition came to power, its Defence Review zeroed in on the carriers: officials working for the new National Security Council strongly challenged the strategic value of the new ships and raised the prospect of cancelling one or both.

Yet that raised the final controversy over the carriers: the contracts Labour signed with the shipbuilders.

In September, the MoD revealed that contracts worth a total of £1.25 billion had already been awarded on the carriers, sunk costs that could not be recovered.

Although the contracts remain secret for commercial reasons, it is understood that they contain binding “break clauses” guaranteeing the shipyards replacement orders from the MoD even if the carriers were cancelled.

To Labour and the industry, the clauses were a sensible measure to protect a strategically important industry. To many Conservatives, they were a poison pill meant to defend the interests of shipyards in Labour heartlands: Rosyth is a few miles from Gordon Brown’s Kirkcaldy and Cowdenbeath seat.

Some Conservatives had long harboured doubts about the carrier project and the way Labour had configured the new ships. Treasury officials were appalled by the spiralling cost of the carriers and their aircraft carrier.And General Sir David Richards, the new Chief of the Defence Staff who is trusted by the Prime Minister, argued that the money for the carriers would be better spent elsewhere in defence.

At a meeting of the National Security Council on 27 September, David Cameron asked officials to look again at the contracts for the carriers and the implications of abandoning the second ship.

Days later, the Prime Minister gave a BBC interview where he repeatedly refused to guarantee the second carrier. His aides privately suggested he was resolved to scrap it.

But at another NSC meeting on October 7, officials confirmed that the contracts were effectively unbreakable and cancelling the second carrier would end up costing the taxpayer even more money.