Defence chiefs responsible for equipment spending have been "hiding from reality" and making "calamitous decisions", an MP has claimed.

Conservative MP Richard Bacon made the comments yesterday as he criticised the "staggering sums" that the Ministry of Defence (MOD) was spending as a result of delays to aircraft carriers that it has on order.

Speaking to defence permanent secretary Bill Jeffrey during a stormy public accounts select committee session, Bacon questioned why the MOD had signed the aircraft carrier contract only seven months before it then delayed the project because it could not budget for it.

That “calamitous decision”, Bacon said, has added £647m of inflation and payments to contractors to the project's total cost.

"These are staggering sums of money and you almost do it casually,” said Bacon.

Jeffrey denied that the decision had been taken casually and said it was "a considered reaction to the budget pressures" that the department was under at the time.

"There were a range of ways to take costs out of the [aircraft carrier] programme; ministers decided delaying the carrier was the least bad," Jeffrey said.

Bacon insisted that, while minister made the decision, it was Jeffrey's job to advise them; and committee chairman Edward Leigh asked witness General Sir Kevin O’Donoghue, chief of defence material, why he did not resist decisions such as these.

The general, who has overall responsibility for the MOD's equipment programme, said it was not for him to do that. "These are decisions by ministers, who chose to spend more money on other capabilities", particularly including the need to fund capability requirements needed for operations in Afghanistan and Iraq.

A lack of realism

MOD officials were also accused of failing to be realistic about the department's future financial situation.

While the department has calculated that budget increases and its commitments over the next ten years will leave it with a £6bn shortfall, but the National Audit Office (NAO) believes the gap could be as much as £36bn.

Jeffrey revealed that he had not wanted the NAO to include their figure in the report, and NAO chief Amyas Morse told the committee that there had been "long discussions with the department". Ultimately, he had decided to publish the figure regardless "in the interests of reality".

Bacon told Jeffrey that “the fact that you didn't want it in public says a lot about the world you've been operating in”.

Leigh later told the permanent secretary that “the budget and governance arrangements of you department are unacceptable to this committee” and demanded that Jeffrey do everything he could to balance the budget in future years.

The permanent secretary said he was committed to doing so, and said the reforms put in motion by the recent review of defence procurement would help, but there was a proviso that success would depend on “a defence programme that is manageable and ministerial decisions about the content of that programme”.