Defence Secretary John Reid has defended the privatisation of military research group QinetiQ.

There had been suggestions that taxpayers were sold short when US company Carlyle Group bought a 31 per cent share in 2002.

With the remainder of the company now being floated, QinetiQ has been valued at up to £1.33bn.

Carlyle stands to make a profit of up to £370.1m on its original £42m investment.

The deal, the first privatisation by the Labour Government, is being investigated by Whitehall's spending watchdog, the National Audit Office.

Mr Reid said that was routine and Carlyle's profit merely reflected the value the company had added to QinetiQ.

He said: "The taxpayer, for those shares we are now selling off, is getting eight times as much for those shares as we could have done in the market a few years ago, precisely because of the value that has been added there.

"It is since we brought in the private sector management that the value of the company has increased. This is precisely why the MoD brought them in.

"The MoD is very good at certain things, but it is not necessarily very good at running companies."

The NAO was investigating "not because there is a scandal but because it is pretty routine for the National Audit Office to investigate these things after the event, we welcome that".

Mr Reid said ordinary investors could buy shares in the new issue.

"Any small investor can phone the broker, they can buy shares just like anyone else," he said.

"The shares will be sold at the present market value to anyone, institutional or individually - that is not what Mrs Thatcher did.

"Secondly, we have refused to waste taxpayers' money by refusing to spend up to £25m on a massive advertising campaign, which Mrs Thatcher and her friends did for idealogical reasons.

"The result was they sold a huge number of taxpayer-owned shares at a hugely knocked-down price, incurring huge expensive advertising for lots of people to buy extremely cheaply and sell six months later and make a lot of money.

"So it did not extend, in any significant way, share owning democracy, but it did extend, in a significant way, the waste of taxpayers' money."