'Almighty' Cabinet row brews over £3bn helicopter contracts

The Cabinet is heading for a bust-up over plans to spend £3bn upgrading the military's helicopter fleet.

The Cabinet is heading for a bust-up over plans to spend £3bn upgrading the military's helicopter fleet.

The row raises memories of the 1980s Westland row that led to two high-level resignations from the Conservative government. The latest split is expected to surface tomorrow at a special Cabinet sub-committee meeting called to decide whether to buy British or allow foreign companies to bid for the work.

Geoff Hoon, the Secretary of State for Defence, and Patricia Hewitt, the Secretary of State for Trade and Industry, are understood to favour handing the contracts to Westland, which employs around 4,000 people in Yeovil, Somerset.

They believe that even though Westland is owned by Italian defence group Finmeccanica, awarding it the lion's share of the contracts would preserve Britain's expertise in designing and building helicopters.

This view is likely to anger the Treasury. Well-placed sources said that the Chancellor, Gordon Brown, believes the Ministry of Defence should hold an open competition for the work to ensure that taxpayers get the best value for their money.

One source said: "This is shaping up to be an almighty row. When it comes to defence deals, there needs to be a level playing field. It will be incredibly damaging for the UK and for the European helicopter industry if the issue is forced though for the wrong reasons."

The row is fuelled by the looming election. An MoD spokesman said that an official announcement on the future helicopter strategy would be made in the summer. However, some members of the Cabinet want to trumpet a preliminary ruling that Westland jobs have been safeguarded before voters go to the polls.

The £3bn programme will see the replacement of the armed forces' ageing Lynx, Puma, Gazelle and Merlin helicopters. In particular, Westland is pushing its new Super Lynx helicopter.

However, the company faces competition from American manufacturer Sikorsky and the Eurocopter, built by the Franco-German defence company EADS.

Eurocopter submitted plans to the MoD's Defence Procurement Agency last month. It is understood that Eurocopter claimed that it could save the taxpayer up to £1bn over the 10-year life of the helicopter programme.