Completely agree with the sentiment, BAE have too much power over the Government. But: "But the Treasury people know: if they thought it would cost more to cancel than it would to carry on, they'd never have tried to cancel."
You have obviously never come across the commercial people within MoD. They probably have only just read the cancellation clause!
The basic problem is that the Treasury approved procurement "process" used in MoD (CADMID) has been in operation for many years and simply doesn't work! It has taken a team of nearly 200 people (nearly half are consultants) 8 years to run the precurment process for DII, and they achieve nothing! Complete waste of money!
Eurofighter's team is only 40 people, but still useless!