When the contract was won in 1993, costs were estimated at �650m

The Commons Public Accounts Committee warned that there must be "tight controls" on the remainder of the project to complete the new facility at Devonport dockyard.

The committee's report followed the disclosure last year that costs had spiralled to �933m, of which the MoD will have to pay �890m, �314m more than originally expected.

The MoD had thought it had transferred the risks of any cost overruns to the private firm which runs the dockyard, Devonport Management Ltd (DML).

DEVONPORT 1980: Purpose-built nuclear submarine refit complex opened 330 acres 11 dry docks Base for seven nuclear-powered submarines Anger at sub work transfer

But the need to have the facility ready to carry out an urgent re-fit of HMS Vanguard - one of the submarines carrying Britain's nuclear deterrent - meant it had no choice but accept the extra costs if the work was to be done on time.

In its report, the Public Accounts Committee said that the MoD had taken an "unrealistic" attitude to the risk transfer.

"As it considered that it had transferred the great majority of the risk to DML, it took a hands-off approach to the project's management," the report said.

The committee chairman, Tory MP Edward Leigh, said that previous assurances by the MoD about the cost of the project had proved "hollow".

"From a position where the great majority of risk was supposed to have been transferred to the private sector, it is unacceptable that the taxpayer is now picking up most of the bill for overruns," he said.

"It is vital that the MoD get a proper grip over the final phase of the project to avoid further cost escalation."

New regulations

DML Chief Executive Dr Denis Gilbert said the company did not perform poorly in the circumstances.

He said: "The absolute dominant tissue that caused the escalation of costs was nuclear regulation and that was government-inspired.

"The fact that we delivered all the facilities on time, and they work very well, is testament to a good job."

Plymouth Devonport MP David Jamieson (Lab) agreed there were new regulations which affected the contract.

He said he believed it was a difficult situation for both DML and the Ministry of Defence.

He said: "I just don't think that anybody had seen a contract of this size, particularly civilianising what had been in the past a Ministry of Defence facility.