The Ministry of Defence has embarked on the unprecedented, four-year programme, saying tatty flags are bad for morale.

An English firm has been awarded a contract to supply as many as 50,000 replacement flags for the Army, Navy, RAF and Royal Marines.

But senior soldiers, families of serving troops, and opposition politicians last night condemned the MoD's priorities, saying servicemen and women were dying as a direct result of poor equipment.

Earlier this month, four troops were killed in action in Afghanistan, including the Army's first female fatality in the campaign, while riding in a Snatch Land Rover, a type of vehicle which has been harshly criticised for its lack of protection against bombs and mines.

The contract, which has been awarded to Zephyr Racing Pennants of Kettering, Northants,

includes new Union Flags, the Navy's Red Ensign and the Army and RAF flags.

In addition, the deal will also cover signal flags and unit pennants flown from vehicles as well as flags for individual bases.

All service bases and headquarters are required by the Queen's Regulations to fly the Union Flag daily, and they normally also display unit and station banners.

According to the company which will manufacture the flags, a typical Union Flag for use by the military, which measures 90cm by 180cm, will cost about £34.95.

Justifying the spending, an MoD insider said: "There's more to the military than bullets and bombs, you know. If you took the attitude of nothing but the essentials, then where would the parades and the nice posh uniforms be? You need these things too."

But the move has led to outrage. Rose Gentle, whose son Gordon Gentle, was killed at the age of 19 in Iraq in 2004 after his Land Rover was destroyed by a bomb, said: "This money would be far better spent on protecting the troops from harm and not leaving them in lightly armoured Land Rovers."

Former tank commander Colonel Stuart Crawford said: "I could think of a lot of better ways to use this money. I know that it won't buy very many Eurofighters or even bits of Eurofighters. But all the spending money on things like this all adds up and the Ministry of Defence is notoriously profligate when it comes to taxpayers' money.

"Is £2.5m spent on flags really appropriate when we have our armed forces fighting two wars?"

SNP defence spokesman Angus Robertson said: "While it is indisputable that flags are maintained at an appropriate standard, it does occur that so many other areas of military spending are not receiving the funding they need. Many people will be asking themselves whether the Ministry of Defence have the right sense of priorities."

Tory MP and former infantry officer Patrick Mercer said: "If you are going to have a flag flying then you want it to be clean. The whole point of having a flag is for it to be a symbol to everyone and if it's scruffy or absent then it's not good. But it seems an awful lot of money for what is after all something at the luxury end of military spending."

And Ben Wallace, who served with the Scots Guards before becoming a Tory MSP and then MP, said: "Flags do actually matter a lot to soldiers. They are a part of belonging and they are important. But that's a very considerable amount of money to spend on this."

Explaining the contract, an MoD spokeswoman said: "This contract is for the replacement of flags in all the armed forces at all bases, including on ships, over the next four years. They do get worn out over time and they do need replacement. We do have an awful lot of flags and you don't want them to look tatty. It's bad for morale."

Tragic losses blamed on equipment shortages include the death in Basra in 2003 of tank commander Sergeant Steven Roberts, who handed over his body armour to a colleague shortly before he was shot.

In 2006, the death in Afghanistan of paratrooper Captain James Philippson was partially blamed on shortages of night-vision equipment and machine-guns.

In 2004, a group of Argyll and Sutherland Highlanders ambushed in Iraq were forced to attack the enemy in a bayonet charge after running out of ammunition. And in 2006 it emerged that British troops serving in Iraq had suffered more than 2,500 failures of weapons and vehicles during the first two years of operations in Iraq. Equipment which failed included the army's main battle tank, the Challenger 2, Land Rovers, rifles and machine-guns.

Meanwhile, relatives of some of the 14 servicemen killed when their RAF Nimrod plane exploded in Afghanistan in 2006 are planning to take legal action against the Ministry of Defence.

The families are in talks with lawyers in London about taking a case to the courts.

Earlier this year, a coroner ruled that the entire RAF fleet of Nimrod aircraft had never been airworthy and should be grounded.

Graham and Trish Knight, whose son Ben, 25, died in the crash are among the families who plan to lodge an action.

Knight said: "We have been in touch with solicitors in London with regards to taking legal action against the MoD for my son's death. The talks are at a preliminary stage.

"Had this been a bus company and the vehicle had been unworthy then legal action would have been taken, if not by the families, then by the Crown Prosecution Service.

"There have been no charges and nobody has been brought to blame for it. I feel that the Ministry of Defence is not beyond the law."