BAE Systems has been criticised in the House of Commons for making thousands of redundancies that will be part-funded by the taxpayer.

In September the defence giant announced it would be cutting 3,000 UK jobs, but the government could face a bill of up to £110 million to subsidise severance pay because it scrapped several of the company’s defence contracts.

The job losses include 1,400 at two Lancashire sites and 900 through the closure of BAE System’s Brough production facility near Hull.

Conservative MP David Davis – whose constituency covers the Brough site – said the country’s biggest engineering employer had delivered an “an agonising shock to its workforce”.

But he explained that the government was liable to part-fund the redundancies under “Yellow Book” rules – where only one defence contractor is invited to tender for contracts for national security reasons, but then has those programmes curtailed by the government.

“It transpires that when BAE lays off 3,000 workers, the BAE shareholder will not meet the cost,” Davies said in a House of Commons debate yesterday. “Given how the system works, between £60 million and £110 million – we do not yet have the number – will be paid by the taxpayer, not by BAE, to lay off 3,000 people and destroy their jobs.”

Davies was particularly critical of the aerospace and defence company because he felt it had long benefitted from a “symbiotic relationship” with the government, where “the British taxpayer funds the development and production of weapons and aircraft”.

Davies rounded on BAE Systems for its “hideously short-term decision” to sell its stake in Airbus and for moving some production of its Hawk aircraft to India, which he felt had contributed to the job loss situation in the UK.

“A policy designed to defend our defence capability is being used to make us subsidise the destruction of that capability,” Davies continued. “If I were the minister, I would not pay BAE a penny. I would tell BAE, ‘This is your decision. This is the outcome of your strategy. If you don’t like it, I’ll see you in court’.”

BAE Systems said it was still in discussions with the Ministry of Defence about the apportioning of redundancy payments.