Top brass at the Ministry of Defence have been forced to deny massaging budgets to disguise overspending.

The charge was leveled as the Public Accounts Committee took evidence on a National Audit Office assessment of the MoD’s major projects report 2007, which said £1bn had been re-allocated over two years.

Former Labour defence minister Don Touhig claimed the strategy, ‘does seem a con trick’, and accused the department of misleading Parliament by presenting what appeared to be cost reductions that were not.

The Labour MP said the reallocations took budget lines out of one project group, giving ‘the impression that you are not in any financial difficulties, which you are.’

Permanent under-secretary Sir Bill Jeffrey said what had been done might seem a con trick, but there had been no intention to present anything as a cost reduction when it was not.