The Ministry of Defence awarded a contract worth up to £3.5bn to BAE Systems yesterday for military training jets, despite being refused financial backing for the deal from the Treasury and the Department of Trade and Industry.
Geoff Hoon, the Secretary of State for Defence, had unsuccessfully pleaded with other government departments for assistance to pay for 44 of BAE's Hawk 128 planes. Some 500 jobs depend directly on the contract at BAE's Brough plant on Humberside, where the company says it is running out of work and, without the MoD order, it would have had to sack its development team, losing the expertise for building the training aircraft altogether.
Those jobs were secured yesterday, as well as up to 1,700 supporting roles at the factory.
The plane will be used to train RAF pilots by providing them with a flying simulation of the next generation of fighter jets, such as the Joint Strike Fighter and Eurofighter Typhoon.
Mr Hoon had approached the Treasury asking for £300m from its emergency reserves to back the deal, with heavy lobbying support from Patricia Hewitt, Secretary of State for Trade and Industry. But Gordon Brown, the Chancellor, turned down the cash plea, saying the money must come out of the MoD's existing budget. He suggested that the MoD ask the DTI for the money instead.
Ms Hewitt was forced to refuse also but her department is furious that it was put in this position, as it insists it has no funds to support military procurement.
Treasury sources yesterday denied suggestions that Mr Brown favoured an alternative jet, made in Italy, which may have been cheaper.