The Ministry of Defence (MoD) and the Treasury will agree to finance equipment projects worth more than £30 billion this week, as the Government wraps up negotiations on the military’s budget, The Times has learnt.

Defence chiefs expect to conclude their department’s comprehensive spending review this week, Armed Forces’ pay the only outstanding issue to be resolved.

Completion of the MoD’s budget will trigger an announcement by Gordon Brown, the Prime Minister, confirming that the Royal Navy will build two aircraft carriers worth £3.8 billion.

Government sources said that Downing Street was pushing to make the carrier announcement by the end of this week, which in turn would allow BAE Systems and VT Group to complete the merger of their shipbuilding assets.

This would create a £1 billion company, expected to be led by Sir John Parker, the chairman of National Grid Transco, with docks in Portsmouth and on the River Clyde in Glasgow. It would be 55 per cent owned by BAE, with VT holding the rest.

The defence budget also contains provision for six Royal Navy destroyers worth £3.6 billion. BAE and VT, which are building the destroyers, have launched two of the ships already and began work on the remaining four without a fixed contract. However, a proposal to build a further two of the Type 45 destroyers has been axed from the MoD budget.

In addition, the head of the Army has won a pledge from ministers to provide a new generation of armoured vehicles to give better protection for troops in overseas war zones, developing a family of “battlefield taxis” capable of surviving roadside bombs. Whitehall sources had indicated that there would have to be cuts in the MoD equipment programme and the Army’s plans for new armoured vehicles, the Future Rapid Effect System (FRES), appeared to be in doubt. However, sources said that Baron Drayson of Kensington, the Defence Equipment Minister, is now “totally aligned” with General Sir Richard Dannatt, the Chief of the General Staff, over the need for the new armoured vehicles. He has stated that the proposed in-service date of 2012 for the first batch is “non-negotiable”.

The Army’s FRES system is intended to replace many present armoured vehicles, such as Saxon, which have been in service for decades and no longer protect soldiers in Iraq and Afghanistan from sophisticated improvised explosive devices. The dangers are so great, particularly from Iranian-supplied “explosively formed projectiles” that hurl copper slugs at up to 5km per second, that the MoD has had to spend £500 million on interim measures in order to beef up armoured protection in Iraq and Afghanistan.

With FRES apparently saved from future defence equipment cuts, BAE Systems and its rival companies in the United States are competing for the huge contract that could be worth £50 billion over the 30-year lifetime of the new armoured vehicles.

The first phase of the FRES programme will involve the purchase of 120 “utility” vehicles – the battlefield taxis that will be used for ferrying troops around in war zones such as Iraq and Afghanistan.

There will eventually be nine different versions of this utility model. Because of the tight deadline for the first 120 vehicles, BAE Systems has acknowledged that there will be nothing available in the United Kingdom in that time, which means that the British defence company will have to turn to a foreign manufacturer for the basic frame. There are suitable, existing programmes in the United States, Germany, Canada, France, Switzerland and the Netherlands.

The Army wants to buy 2,000 battlefield taxis and another 1,000 heavier vehicles, which will replace or complement the existing Warrior infantry fighting vehicle.

Other systems to be replaced include the Scimitar and Spartan reconnaissance vehicles.

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