Government ministers who refused to help save 1,500 Tyne shipbuilding jobs have bailed out a Scottish yard.

Defence procurement minister Lord Bach said earlier this month there would be no financial aid to support Swan Hunter when the Wallsend yard runs out of work in 2006.

Bringing forward naval contracts were also ruled out.

But there was outrage last night as it emerged that the government gave a £140m contract to build two naval vessels to BAE Systems' yard in Glasgow to save 1,700 jobs - and then paid around £20m to the defence giant when the project ran into difficulties.

Politicians and unions last night demanded a fairer deal for Swans while business leaders said the Government is risking seeing shipbuilding in the region "dribble away".

Geoff Hoon, secretary of state for defence, described the contract as `a real lifeline' to the BAE yard at Govan, adding: "It was important to provide continuity of work in order to retain key tradesmen in the shipyard."

Newcastle East and Wallsend Nick Brown, who is due to meet Mr Hoon on the issue next week, said Swan Hunter was "suffering for not being one of the big players". Mr Brown also said that

the principle of bringing forward orders to safeguard skills should now also apply to Swan Hunter, when the order book dries up in the next 18 months.

"That's something I shall be putting to Geoff Hoon," Mr Brown said.

Swan Hunter has a £40m hole in its accounts after a contract to build the £160m Largs Bay and Lyme Bay vessels - sister ships to the Mount Bay and Cardigan Bay being built by BAE at Govan - ran over budget.

But while BAE was shielded from any losses associated with it going over the £140m budget, Swan Hunter was left to shoulder the risks on the same project.

Mr Brown said: "This contract protects BAE Systems' position but does not protect Swan Hunter."

GMB general secretary and former North-East regional secretary, Kevin Curran, said: "We will do whatever we can to ensure the government gives us a fair crack of the whip. If there is a lack of support for Swan Hunter then we will be knocking on the government's doors hard for a fair deal."

The union has been a vocal advocate of demanding changes to the way MoD contracts are awarded, away from the "fast and famine approach" to one which smoothes the peaks and troughs of defence contractor order books.

"We want a viable shipbuilding industry and want the government to assist by trying to push orders for the Royal Navy through in a regular, orderly fashion."

The meeting between Mr Hoon and Mr Brown will also be attended by North Tyneside MP Stephen Byers and Tynemouth MP Alan Campbell, a ministerial aide to armed forces minister Adam Ingram.

Mr Campbell said he too would press the Secretary of State about the need to retain skills in the region, adding: "We really need to find something to fill the gap."

It is not the first time BAE has benefited before from favourable government decisions.

The Ministry of Defence moved forward a contract last year for Hawk training aircraft to save 2,000 jobs at BAE's yard in Brough, Cumbria.

George Cowcher, chief executive of the North-East Chamber of Commerce, said: "If Swan Hunter is allowed to sink it will be a national tragedy. This vital asset must not be allowed to dribble away."

Swan Hunter chairman Jaap Kroese said yesterday: "This is the nature of the deal that BAE has with the Ministry of Defence. They have this agreement, and we have no such agreement. That is the situation. What can we do?"

A spokesman for the defence procurement agency - a division of the MoD - confirmed that Mr Kroese's talks are continuing, but added: "These are separate contracts which need to be viewed separately."

The Journal: Today's Voice of the North

Page 2: Aid for BAE while Tyne yard is left to struggle