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The Royal Yacht Britannia replacement is to cost up to £250 million – but Boris Johnson said it would pay for itself "many, many times over".
In a pre-recorded speech shown at the official launch of plans for the new UK national flagship, the Prime Minister said he wished to "metaphorically smash a bottle on your hull" as he praised the initiative.
He said it marked the "beginning of a journey that I believe will cover its costs many many times over". Earlier this month, the Government had said the flagship would cost £150 million.
A formal "invitation to tender" document for "design phase one" from the Ministry of Defence – the first stage of getting the ship built – said: "The flagship will be contracted under a firm price contract, the total available budget being £150 million."
However, speaking after Mr Johnson, Ben Wallace, the Defence Secretary, told those at the event in Greenwich: "Subject to working through bids, competition and technology, I aim to commission the ship for between £200 and £250 million on a firm price."
The Telegraph understands that £150 million remains the "target figure for industry" but is "part of a cost bracket". The higher figures are understood to ensure that "there is no overspend".
Mr Johnson said: "We need a way of showcasing the very best of Britain, the best of our business and manufacturing and our agriculture and service industries.
"At every big trade fair and expo around the world we need a new aquatic forum, a conference centre, a marketing suite, a place that the world's top investors will fall over themselves to visit, a new flagship for a new type of commercial diplomacy."
He said building the ship, intended to be at sea promoting British business by September 2025, would support British jobs and growth, while making use of "clean, green and digital technologies", adding: "We want our new national flagship to be a revival of national shipbuilding in the UK."
Since 2016, The Telegraph has been campaigning for a replacement for Britannia, which was decommissioned in 1997.
Mr Wallace set out that the tender process would run until the end of October, with the hope of announcing the winners in December and the start of construction in "a British shipyard as early as next year".
He said: "I want the grandparents of the future to boast to their grandchildren and say one day: 'I helped built that ship,'" adding: "If we do it right, it will pay for itself over and over again."
However, Nick Thomas-Symonds MP, Labour’s shadow home secretary, questioned why the cost of the flagship had escalated since the initial quote.
He said: “Boris Johnson has lost control of his vanity yacht. It is absolutely staggering that costs have rocketed by £100 million in a week.
"Labour would scrap the Government’s latest pet project and invest taxpayers' money wisely to tackle crime and the surge in antisocial behaviour under this Conservative government.”
The Defence Secretary Ben Wallace is the guest on this week's Chopper's Politics, The Telegraph's weekly political podcast. Listen to the interview using the audio player above, on Apple Podcasts, Spotify or wherever you listen to podcasts.