The government has been accused of trying to suppress a report that found the Ministry of Defence is wasting billions of pounds every year as a result of ordering projects it cannot afford.

The report, commissioned by former defence secretary John Hutton and led by ex-MoD aide Bernard Gray, found that the MoD is wasting between £1.5bn and £2.5bn per year. Its findings were due to have been published before MPs broke up for the summer recess but its release has been delayed, with the prime minister announcing last month that the report would now form part of a further defence review. An unnamed MoD official told Channel 4 News yesterday that Number 10 had "panicked" at the findings of the report and intervened to prevent its publication.

The programme said the MoD could only afford two-thirds of the defence equipment it was buying, forcing it to delay major projects, such as new aircraft carriers. It added that the report recommends holding a review of defence policy every parliament to help control its budget and bringing in the private sector to improve the MoD's procurement expertise.

The findings come as the government stands accused of failing to provide troops in Afghanistan with the equipment they need. Since operations began in the country, 192 British service personnel have died, with 22 killed in July alone.

Douglas Young, chairman of the British Armed Forces Federation, said: "This is worrying news because it is not just about the well-known complexity of defence procurement but that taxpayers' money, instead of being spent on real defence needs, has been poured down the drain because of delays and underfunding."

The Conservatives accused the government of wasting money that could be spent equipping frontline troops in Afghanistan. The shadow defence secretary, Dr Liam Fox, said the findings were a "damning indictment of 12 years of incompetence".

"By trying to suppress this report, the prime minister has demonstrated that he cares more about the reputation of Labour than he does about the wellbeing of the Armed Forces," he said.

Defence minister Kevan Jones told the programme that he did not recognise the £2.5bn figure, although he added this did not mean it was wrong. He rejected any suggestion that defence procurement was incompetent and denied Gray's report said it was.