Paul Drayson, the Labour donor handed a lucrative government contract to supply millions of doses of smallpox jabs, has admitted his vaccines are no better than those of a rival overlooked by ministers.

Powderject Pharmaceuticals, headed by Mr Drayson, was, with Bavarian Nordic of Denmark, given a £32m contract to supply emergency stocks of smallpox vaccines. However, Mr Drayson, who gave £100,000 to Labour, told MPs yesterday that his vaccines, based on the Lister strain, were no more effective than a New York version developed by Acambis, a rival that was denied the chance to bid for the contract.

"The two predominant strains - the New York City Board of Health strain and the Lister strain - are equivalent in that the efficacy and safety of the two vaccines are the same," he told the Commons science and technology committee.

The disclosures came as it was claimed that ministers wasted £20m of taxpayers' money by handing Mr Drayson the contract.

According to a written parliamentary answer unearthed by the Tories last night, Bavarian subcontracts the work to a German company, Impfstoffwerke Dessau-Tornau. Henry Bellingham, Tory industry spokesman, said the government would have saved taxpayers £20m by sourcing the vaccines direct from IDT.

The figures are a fresh embarrassment to the government, which the opposition has accused of favouring Mr Drayson's company.

An investigation into the award of the contract, done without a competitive tender, is under way by the National Audit Office, parliament's spending watchdog. However, it emerged last night that ministers may be saved too much embarrassment as the report is due to be published on Budget day.

The NAO, which is independent from government, denied that ministers had applied any pressure over the timing of the report.

The government has defended its decision to award the contract to Powderject. But John Hutton, the health minister, admit ted in a parliamentary answer that the joint committee on vaccination and immunisation had established "there was no difference between the two strains on scientific grounds".

A second, bigger smallpox contract has gone out to tender, but Powderject is the favourite to win it. Acambis has complained that the government has decided to reject the New York strain in which it specialises.

A Department of Health official said last night: "We had discussions with five potential suppliers in early 2002. Only Powderject could supply the required doses against our criteria in the timescale specified. We were advised that Powderject was the sole UK distributor for Bavarian Nordic."