Plans to rent out the Royal Yacht

Britannia Saved From the Scrapyard

"Ministers are working very energetically in trying to devise a way in which we can both keep the Yacht and refurnish it properly so it's good for the Royal Family and great for Britain too, but using private finance and a lease-back arrangement," he told GMTV's Sunday programme. "I hope very much that it will be possible to do and I am quite hopeful."

Several Sunday newspapers have reported that Britannia would undergo a £50 million refit, extending her life for another 20 years.

The Queen and her family would pay rent to use the vessel in future under a "timeshare" arrangement favoured by the Chancellor Gordon Brown.

The Mail on Sunday said the Chancellor decided to shelve Tory plans for a £70 million replacement.

Britannia will continue to serve the Royal family

The paper reported that the millionaire Treasury minister Geoffrey Robinson - who is in charge of the Private Finance Initiative to attract private investment into public projects - would play a key part in persuading private financiers and banks into a consortium to refit Britannia and lease it back to the Government.

He believes the ship would pay its own way under plans to rent it to businesses for periods of up to 70 days, said the paper. But the Queen and other members of the Royal Family would have first call on the vessel for official visits and functions.

The Royal Navy would continue to crew the ship, although the installation of modern technology would see the present complement halved.

Mr Mandelson did not rule out the possibility that public money would have to underwrite the deal, but he said he hoped the taxpayer would not have to pay. "Our aim is to devise an arrangement where the taxpayer will not have to pick up the tab, because there are so many other competing demands for public expenditure," he said.

Tory Accusations of a U-Turn

Alan Duncan, Tory vice-chairman and political parliamentary secretary to party leader William Hague, told GMTV: "It is a complete and utter U-turn fudge and I welcome it. I would rather they just cleanly paid for it. But in principle I believe the Queen should have a Royal Yacht and I'm very glad this is happening in some way or other."

He claimed: "Here is a double standard in the sense that they railed against it in Opposition and now they're finding a way to do what we're asking in a slightly different way."