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The Ministry of Defence is being run with "astonishing" inefficiency and could be £36bn short over the next 10 years, according to a report.
The Commons public accounts committee said there had not been a "realistic assessment of the resources available" under the Labour administration.
A "dangerous culture of optimism" at the department meant budget commitments were allowed to get out of control, according to its report.
The damning verdict came in the cross-party committee of MPs report on the MoD's management of its £42bn a year budget.
It also criticised the MoD's accounting officer, who between 2005 and this autumn was permanent secretary Sir Bill Jeffrey.
The committee said Sir Bill should have asked for formal written instructions when signing "unaffordable" contracts for two aircraft carriers in 2008 "without having identified compensating savings".
"Because these savings were not subsequently found, it was necessary within a year to delay the project, resulting in an enormous cost increase and poor value for money."
The report also critcised the department's failure to have an unallocated reserve of funds to pay for unexpected events.
Committee chair Margaret Hodge said it was "astonishing" that the department had not produced a long-term financial strategy to guide decisions on making cuts.
"Instead, it has managed to stay within budget each year by making short-term and ad hoc in-year decisions to cut programmes and defer the acquisition of kit," she said.
"These have led to inefficiency and even great¬er costs in the longer term."
The committee also raised concerns about the MoD's management of the defence estate, saying it did not even have necessary targets or criteria to decide whether it was too large.
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