Q&A: UK aircraft carrier contracts

Britain will this week reveal another big increase in the cost of building its two new aircraft carriers, declaring that total funding will rise by £800m to £6.2bn. The announcement will raise fresh questions over the government's handling of the flagship Royal Navy project.

Why are these cost overruns taking place?

Philip Hammond, defence secretary, will argue that the terms of the carrier contract signed by the previous Labour government contained too few incentives for industry to keep costs down.

Under these terms, industry ended up picking up only 10 per cent of the burden of any cost over run while the taxpayer would pick up 90 per cent. Mr Hammond has now renegotiated this to 50-50.

A defence department official said: "The last Labour government signed a flawed contract that allowed costs to spiral . . . They failed to properly budget for some of the landing systems needed on the new carriers and woefully underestimated the costs overall."

The official said the renegotiated contract "will finally set a realistic price for delivering the aircraft carriers and change the nature of the contractual relationship with industry to better protect taxpayers' interests".

What about Labour's argument that costs have risen because of changes to the type of aircraft to fly from the carriers?

In 2010, David Cameron made the surprise decision to buy the "C" version of the F35 fighter jet from Lockheed Martin of the US. This aircraft is known for its "cat and trap" system, which launches the plane from aircraft carriers and stops them when they land. In doing so, the prime minister abandoned Labour's plans to buy the F35-B - a rival model that has vertical take off and landing capability. Yet in 2012, Mr Hammond announced the UK was switching back to the original order and scrapping the C version.

About £190m of the £800m increase in costs to be announced this week stems from the need to build the Joint Precison Approach Landing System for the F35-B, something that had not been factored in previously.

Do we need the carriers?

The Royal Navy has long argued that the new ships - Queen Elizabeth and Prince of Wales - are essential if the UK is to project military power against potential adversaries in the 21st century.

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Critics argued that the two carriers were an out-of-date symbol of cold war power, at a time when the world was moving to a new era of conflict that might be dominated by counterinsurgency, terrorism and cyber warfare.

They argued that the vessels would be increasingly vulnerable to attack from specially designed anti-carrier missiles developed by the Chinese.

They pondered, too, whether the UK really needed these ships at a time of serious austerity in defence spending. After all, the US, with whom Britain would be allied in almost any conceivable conflict, has 11 carriers of its own.

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