Row over allocation for armed services

Gordon Brown was accused of short-changing defence chiefs yesterday after it emerged that he had "fiddled" their budget and cut spending since last year.

The Chancellor announced in his speech that defence spending would increase by £3.5bn to £32.8bn by 2005-2006, which he said was "the largest sustained real terms increase in defence spending in 20 years".

The Tories accused Mr Brown of "spin" and pointed out the extra cash would not increase spending to 2001-2002 levels, when it was worth £30.7bn. Iain Duncan Smith said the Treasury had deliberately based the increase on this year's budget, when spending dropped to £29.3bn.

The Government spent £30.7bn in 2001-2002 and cut spending by £1.4bn this year.

By 2005-06, the last year of this spending round, the Ministry of Defence budget will still have £300m less than last year.

The Conservative leader said that the cut in spending would punish an already cash-strapped Army, Royal Navy and RAF. "Once again Labour has hidden the truth using spin, smoke and mirrors," said Mr Duncan Smith.

Announcing his allocation for the armed forces Mr Brown said that the cash recognised the contribution of the armed forces in recent conflicts abroad.