UPDATE 2-Britain to fund $500 mln refurbishment of BAE submarine yard
* Investment enables renewal of Trident nuclear system
* Underlines Conservative party's commitment to replacement
* Successor programme to employ 6,000 people at height
BARROW-IN-FURNESS, England, March 13 (Reuters) - Britain will fund a 300 million pound ($500 million) redevelopment of BAE Systems's submarine shipyard, a step that would enable the costly renewal of the Trident nuclear missile system which has divided the coalition government.
The debate centres on the merits of replacing the vessels carrying the Trident missiles -four ageing Vanguard-class submarines - which would cost 20 billion pounds ($33 billion) at a time when the government is trying to cut back on spending.
The Conservative party, the senior member of the two-party ruling coalition, favours a like-for-like replacement of the deterrent while its junior Liberal Democrat partner believes the current size of the fleet is more suited for the Cold War era and should be scaled down.
The announcement by Defence Secretary Philip Hammond on a visit to the Barrow-in-Furness shipyard on Thursday, underlines the Conservatives' commitment to the replacement option despite their coalition partner's objections.
"Every announcement of spending on the successor programme is another token of commitment to that programme," Hammond, a Conservative, told reporters.
"We intend to continue building submarines here for the foreseeable future. We need a sovereign submarine building capability. If you want to maintain that world class, battle-winning, cutting-edge, you've got to invest both in skills and the physical infrastructure," he said.
The government has spent 730 million pounds on assessing the Successor programme since 2011, including contracts worth a total of 350 million pounds that it awarded to BAE, Rolls-Royce and Babcock in 2012 to design the submarine.
Altogether it expects to spend 3 billion pounds on the assessment phase before a final decision on Trident is taken in 2016, a year after parliamentary elections. About 3,000 people are currently employed on the Successor programme which at its busiest will employ 6,000 people.
Tony Johns, managing director of the submarine division of BAE Systems Maritime, said the improvements were vital to meet the government's target of having the first submarine in service by 2028.
The Liberal Democrats did not immediately respond to requests for comment.
"It won't make happy reading for Liberal Democrats, but this is money which we have always understood would need to be spent and does need to be spent in order to secure our submarine building capacity," said Alison Seabeck, who looks after defence equipment and procurement policy for the main opposition Labour Party which also favours a like-for-like replacement.
The eight-year-long redevelopment programme includes the refurbishment of existing buildings and the construction of new facilities at the Burrow yard, which built its first vessel in 1886 for the Ottoman navy.
Should government give the go-ahead, BAE expects to start building the first Successor in September 2016, which will require the company to hire about 1,000 more people at the shipyard.
Renewing and maintaining Britain's overall submarine fleet is expected to cost 38 billion pounds over the next decade, representing a large share of the country's 164 billion pound defence equipment budget, the defence ministry said last month.
The 97-metre long, nuclear-powered, Astute class attack submarines currently being built at the yard cost on average more than 1 billion pounds each.
HMS Artful, the third ship out of seven planned, will be put in the water for testing next month while the steel has been cut on the final Astute class submarine, BAE also said on Thursday
The government also awarded BAE a five-year 23 million pound submarine design services contract whereby it will provide analysis on technical matters and support design upgrades, principally for the Astute class submarines.