Geoffrey Robinson, the multi-millionaire Paymaster General, has drawn up plans for a complete makeover of the Queen's favourite way of travel.
Britannia would get new engines, state-of-the-art electronic navigation systems and a lavish refurbishment of the state and private rooms. The refit would be paid not from public funds, but through the government's Private Finance Initiative.
Under the Robinson plan, which has already been put to the Ministry of Defence and will shortly go to Buckingham Palace, 30-year loans would be secured from the City and other private sector sources such as banks.
A completely-renovated Britannia would then be available for hire by big business - and possibly foreign dignitaries such as the Saudi royal house. The Queen would also pay rent to use it. Income so generated would be used to repay the loans.
MoD chiefs have been told that the Royal Navy will operate the vessel. Ministers envisage that the crew will also include a Commonwealth Cadet Force of perhaps 50 young people, who will receive training on board the ship. The cadets would be changed every year.
The government believes its PFI plans for Britannia will prove acceptable to the Queen. In January this year, the then Defence Secretary, Michael Portillo, prompted public controversy when he announced plans to build a new royal yacht at a cost to the public purse of pounds 60m. It was to be in service by 2002, the 50th anniversary of the Queen's accession. Gordon Brown, then Shadow Chancellor, said that a Labour government would not spend taxpayers' money on a new Britannia.
Labour accused the Tories of seeking to make political capital out of the Royal family in the run-up to the general election, and some MPs denounced the project as "a symbol of extravagance and irrelevance".
The Paymaster General's plan adheres to Labour's pre-election promise not to finance a replacement vessel from public funds, and brings a high- profile project to the Treasury's revamped PFI scheme. "We have never been against a new royal yacht," said a senior government source. "But the taxpayer should not be forced to pay for it."
Britannia was commissioned in 1954, and has since travelled more than a million miles all over the globe, on 700 royal visits. The Queen made it known privately that she would prefer to see the ship scrapped than become a hotel or a floating tourist attraction.
The royal yacht was due to be retired from active service this year, after playing a leading role in Britain's handover celebrations in Hong Kong at the end of June. Chris Patten, the last governor of the colony, and the Prince of Wales sailed away on Britannia with flags flying and bands playing. Prince Charles is known to have favoured a private finance solution to the problem of funding for a replacement, while the Duke of Edinburgh wanted a state commitment.
The Queen is thought to have had some misgivings about the prospects of private company logos on her yacht.
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