Paying the price of war in Iraq

The Government's £3bn "war kitty" for Iraq is almost exhausted and the eventual cost to Britain of the conflict and its aftermath could double to £6bn, the equivalent of 2p on income tax.

A study by the International Institute for Strategic Studies (IISS) estimates the continuing operation in Iraq is costing Britain £100m per month. It puts the bill for the three-week war at about £1.6bn and the pre-conflict costs at £700m - a figure confirmed by the MoD.

Gordon Brown announced a £3bn special fund for the conflict in March. Since then, the Government has refused to disclose how much has been spent or the cost of the operation. But Treasury sources said yesterday the Chancellor would announce a further tranche of spending on Iraq when he delivers his pre- Budget report in November.

There is growing concern in the Government about the soaring cost of the commitment in Iraq. The Treasury has warned ministers that they face a tough government-wide spending review next summer and experts have predicted a "black hole" in finances in the next few years, which will result in tax rises or spending cuts.

Mr Brown hopes other countries will agree at a conference in Madrid next month to share the huge burden of rebuilding Iraq. However, that could be difficult unless agreement is reached at the United Nations on a new resolution for the running of post-war Iraq.

The IISS study, carried out for The Independent, suggests the £3bn will have been exhausted by the time Mr Brown unveils his draft Budget in November. Mark Stoker, a defence economist at the IISS, said the fund may have been used up already because an undisclosed amount was earmarked for humanitarian aid.

He described his estimates, based on the published cost of previous operations, such as the 1991 Gulf War and the peace-keeping operation in Kosovo, as "conservative." He said the cost of the current operation will prove higher than in Kosovo because of "the dangerous environment" in Iraq.

Ministers are braced for a row between the Treasury and the MoD about whether some of the money should be found from within the defence budget. The IISS report warns: "If the whole cost of the Iraqi peace-keeping operation had to be met from the defence budget, it would put incredible pressure on future procurement plans."

Mr Brown said yesterday: "There is nobody in this country, whatever their view on Iraq, who does not want our troops and armed forces properly protected and properly equipped. My commitment has always been that, whatever the other difficulties, we will make sure our troops and armed forces are not left defenceless and not left ill-equipped when they are in the field."

Mr Blair said on Sunday that British troops would stay in Iraq "till we get the job done". Asked if that could mean five years, he replied: "I don't think it would be anything like that." But if the forces stay for more than two years, as some ministers fear, then - on current IISS estimates - the total bill would rise to £6bn.

The United States is spending $4bn (£2.4bn) a month to support its 150,000-strong force in Iraq, ten times the number of British troops. The IISS points out the US makes very generous payments to forces serving in conflict areas and they enjoy "significantly more luxurious and expensive accommodation and other facilities" than British counterparts.

Mark Seddon, a member of Labour's national executive committee, said: "We seem to be pouring money into the sand. The costs are deeply worrying because they will affect the amount of money available for public services."

There was continuing anger at Labour's annual conference in Bournemouth yesterday about the rejection of calls for a vote on Iraq. The RMT rail union is appealing against the blocking of its emergency motion on the issue.

Tony Woodley, the leader of the Transport and General Workers, said: "With the world divided, the UN divided, our country divided and our party divided, it would be inexplicable if we did not have a debate on this crucial issue." Some delegates claim they were given "disinformation" by Labour officials, who told them they did not need to vote for a debate on Iraq because it would be covered by a general discussion on "Britain in the world". But Labour sources insisted there would still be a "lively debate" on Iraq tomorrow.

Comparing the bill with the cost of the 1991 Gulf War, the IISS found the duration of this year's conflict was similar and involved about the same number of troops. But there was significantly heavier use of ground troops and their equipment this year than in the 1991 "Desert Storm" campaign, which was primarily an air war.