Chancellor stocks up £1 billion war chest

The Chancellor Gordon Brown today set aside a war chest of £1 billion to cover the additional cost of possible military action against Iraq and the battle against terrorism.

In his Pre–Budget Report, Mr Brown said that the money – "to be drawn on if necessary" – would be kept in reserve to meet Britain's international defence responsibilities.

Although Mr Brown did not mention Iraq by name, there was little doubt among defence observers that this was what the money was being set aside for.

But experts warned that the sum would not be enough to fund a war of any more than a limited duration.

Shadow defence secretary Bernard Jenkin said it was no more than "smoke and mirrors".

"The Ministry of Defence accounts published last week show an underspend of £1 billion last year," said Mr Jenkin.

"Labour is still spending £1 billion less in real terms than the last year under the Conservatives."

Mr Brown told MPs: "We can ... amidst global uncertainty do more to meet our international obligations.

"So it is right in the new figures presented today, consistent with past Treasury practice, to set aside to meet our international defence responsibilities a provision of £1 billion to be drawn on if necessary."

Defence experts said that additional calls on the money in the case of a war would include the hire of ships and planes to transport troops and refits for Challenger tanks which were knocked out by sand and dust on their last desert exercise in Oman.

Dr Paul Moorcraft, editor of Defence Review, said: "There is also concern about Saddam using chemical and biological weapons in theatre, and the massive cost contingency they may be thinking of is decontamination, which is enormously expensive and time–consuming.

"Britain may also need a contingency for longer–term 'nation–building' if Iraq is occupied for some months after a short war, though I would presume the Americans would be paying for most of that."

Defence Review's Adam Baddeley warned that further costs could be expected if the war dragged on for more than a few weeks.

He said: "We don't know how long a war in Iraq would go on for, but war is an extremely expensive animal. Is £1 billion enough? Probably not.

"But if the MoD needs more money half way through a war, the Treasury isn't going to say no."