A former Labour defence minister has become an adviser to a French arms firm that supplies the government with billions of pounds worth of equipment.

Lady Taylor of Bolton – Ann Taylor – was minister for defence equipment for a year until 2008 and became minister for international defence and security until Labour lost the general election in May.

This month she joined the arms contractor Thales, which is part of the consortium supplying two aircraft carriers that are £1.541bn over budget.

The disclosure comes amid calls for closer examination of the "revolving door" of jobs between the Ministry of Defence and the arms industry.

Peter Kilfoyle, a former Labour defence minister, said: "I think its sad that people think they have to go off and do these things. I don't think that former ministers should be working in this area at all. There's going to be a view here that there is a potential conflict of interest."

Taylor, 63, became leader of the House in 1997. In 2001, she became chair of the intelligence and security committee, which monitors the expenditure, administration and policy of the security service, GCHQ and the secret intelligence service. While at defence from 2007, Taylor was often involved with Thales.

In 2008, she visited Thales' British headquarters in Crawley, West Sussex, to see their £700m Watchkeeper unmanned plane, or "drone", programme which aims to be ready this year. In 2009, she met Thales staff at two arms exhibitions and at an international strategic thinktank. That November she announced that the government was deciding whether it could arm the Thales drones.

The advisory committee on business appointments, which decides if ministers can take up a job after leaving office, announced her appointment to Thales Corporate Services last week. She applied for permission to take the job in September and has been told that she cannot personally lobby ministers or civil servants until May 2012.

Thales is part of the consortium supplying two aircraft carriers that are £1.541bn over budget. The coalition government considered cancelling one, but could not because of penalty clauses. Instead, one of the ships will be mothballed temporarily.

Thales UK, the British arm of the ninth largest defence contractor in the world, has a history of hiring former ministers. Its chairman is the former Conservative arms procurement minister Roger – now Lord – Freeman. Thales' advisory board includes former Labour minister Lord Clark, Lord Powell, Margaret Thatcher's former top adviser, and Sir David Pepper, who was until last October director of the government spy centre GCHQ.

Taylor was shadow leader of the House when the then Conservative minister Roger Freeman put forward proposals for a ministerial code of conduct in 1995 that would force ministers to seek advice from the independent Business Appointments Advisory Committee before taking up a private sector job. She introduced the code when Labour came to power in 1997.

The MoD wastes billions every year through inefficiency and poor management of major projects, according to reports in the Guardian last year.

On yesterday, Sir George Young, the leader of the Commons, said he would examine the "revolving door" between the ministry and defence companies.

Labour MP Denis MacShane called for a 10-year quarantine before ministers, civil servants or uniformed officers could join a defence-related company.

Last week the government appointed Bernard Gray as chief of defence materiel – to tackle the waste and incompetence at the MoD. Gray, a businessman and former journalist, laid bare the inadequacies of MoD procurement in a landmark report last year.

In 2000 it was revealed that Thales had rented two Bristol flats owned by Tony Blair, the then prime minister.

Thales Group generated revenues of £11.5bn last year with 68,000 employees in 50 countries, according to its website.Thales UK employs 8,500 staff based at 40 locations. In 2009 Thales UK's revenues were around £1.5bn.

A spokesman for Thales said any meetings with Taylor when she was a minister were above board. "As a significant player in the UK defence sector it is only natural that we have regular meetings with relevant ministers. Any conversations relating to the aircraft carrier contract will have been conducted by the Aircraft Carrier Alliance."

Revolving doors Whitehall to defence industry

Lord Reid, secretary of state for defence from 2005 to 2006, said in 2008 that he had become group consultant to G4S, the security company that worked closely with the Ministry of Defence in Iraq.

Michael Portillo, (pictured) the secretary of state for defence from 1995 to 1997, became non-executive director of BAE Systems in 2002 before stepping down in 2006.

Air Chief Marshal Sir Glenn Torpy, the chief of staff from 2006-2009, retired from the RAF last year and will become senior military adviser to BAE Systems in January.

Admiral Sir John Slater, the former first sea lord, left the military in 1998 and became a director and senior adviser to Lockheed Martin UK.

Major-General Graham Binns left the military this year and is chief executive of Aegis Defence Services, a leading security company.

Sir Kevin Tebbit, permanent under secretary at the MoD, is chairman of Finmeccanica UK, owner of Westland helicopters.

David Gould, the former chief operating officer of the MoD's procurement division, is now chairman of Selex Systems, part of Finmeccanica.