Plans to roll out superfast broadband in rural areas are in chaos because government mismanagement has given BT a near-monopoly in the market, a report has found.

The report, by the Commons public accounts commitee, came as Labour questioned why Ian Livingston, the head of BT when the contracts were signed, was made a peer and a trade minister in June. Livingston, 49, received shares worth £8.9m when he left BT in June to take up his unpaid government role. He received £2.4m last year in salary, pension and bonuses, as well as £6.6m in shares.

In its report, the MPs said the Department for Culture, Media and Sport allowed BT to profit from £1.2bn of taxpayers' assets after no other companies won a single contract to increase broadband coverage across Britain.

BT has been quick to exploit its position by refusing to reveal costs to civil servants or coverage to local councils, the MPs said. This information would be crucial in guaranteeing that BT's bids are reasonably priced and fair for the public.

As a result, the committee has taken the unusual step of calling for the department to halt payments of a further £250m until ministers and civil servants introduce competition and value for money.

Mary Creagh, the shadow environment minister, said: "These botched contracts were the responsibility of ministers. But the recruitment to government of the man who was in charge of BT when these contracts were signed was David Cameron's call."

The findings will increase pressure on ministers to intervene in the market. In 2011, the prime minister said it would be "absolutely vital in driving the creation of the small businesses and growing businesses that will be so important to keep the growth of employment in our country".

Superfast broadband will be accessible to nearly two-thirds of the UK by next spring. Government support is needed to supply the final third in difficult-to-reach areas, where telecoms operators will struggle to make a profit on their investment.

The plans are already two years late, with taxpayers footing a greater proportion of the bill, the National Audit Office said in July. The worst-affected areas included Merseyside, Oxfordshire and Derbyshire, which were among those councils that are yet to sign a contract with BT.

"Nevertheless, BT will still benefit from owning assets created from £1.2bn of public funding once the programme is complete," the report said.

The committee has asked the government to improve future modelling work before any further monies are released for further broadband coverage, the report said.

MPs were also surprised that DCMS had not demanded transparency before signing deals with the multinational to cover 90% of each rural area with superfast broadband.

Last year a whistleblower was dismissed by Broadband Delivery UK, the national broadband funding programme, after drawing up a spreadsheet to help councils share information.

BT has refused to provide details of speed and coverage in each local project, which has in turn prevented other suppliers from developing schemes to cover the remaining 10%, the report found.

Some areas, where cabinets are a long way from the nearest exchange or fibre trunk route, are clearly more expensive to connect than others. But the average cost in England is 12% higher than in Northern Ireland, where BT has already completed its work.

Checks made by civil servants have identified overcharging. In one area BT was found to have inflated project management costs by £3m. BT refused to let civil servants inspect its books to confirm that the costs it charges to the public purse were the same as on its own commercial projects.

BT said the report was wrong and failed to take on board the company's submissions to the committee. "We have been transparent from the start and willing to invest when others have not," a spokeswoman said. "It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy – terms which drove others away. The taxpayer is undoubtedly getting value for money," she said.

The DCMS said the department had reduced costs to the taxpayer."We put in place a fair commercial process and encouraged different suppliers to bid. We are disappointed that the PAC fails to recognise that thousands of rural premises who have never had a decent broadband supply are now getting one," she said.