Bigger budget for armed forces

Britain's armed forces won their first real-terms budget increase for more than a decade in the settlement after a tough battle between defence chiefs and the Treasury.

Britain's armed forces won their first real-terms budget increase for more than a decade in the settlement after a tough battle between defence chiefs and the Treasury.

The defence budget will go up from just under £23 billion this year to almost £25 billion in the financial year 2003-2004.

Next year the budget will rise in cash terms by £400 million - a real-terms increase of 0.1% followed by real growth of 0.2% and 0.7% in the following two years.

There will also be £200 million extra for defence this year in addition to the extra money in the comprehensive spending review.

Senior defence sources said it was the first time the defence budget has seen growth in real terms - above inflation - since 1985 and reversed some of the cuts imposed by the strategic defence review.

Defence Secretary Geoff Hoon said it was a "vote of confidence" in the armed forces showing the Government was serious about defence.

He added: "It is recognition of the important and magnificent work done by the armed forces since this Government came to power: in Kosovo, in Sierra Leone, in the Gulf, East Timor and elsewhere - helping people who cannot help themselves.

"The settlement recognises that whilst the British armed forces have risen to every challenge, doing so has imposed strains on our people and has exposed deficiencies.

"The Government is serious about relieving those strains, and correcting those deficiencies. The new money will help to do that."

Defence sources said there would be two spending priorities for the money.

Firstly, buying new smart missiles for RAF planes and better ground-to-air communications equipment to put right weaknesses exposed in the Kosovo campaign.

Secondly, improving living quarters for married and single men in the armed forces after years of concern about the state of armed forces' accommodation.

However, they warned against expecting a spending boom. "It is not an absolute bonanza," said one. "We are not going to be announcing big new spending projects."

The extra money comes after what the sources made clear was a tough battle with the Treasury.

The Treasury at the weekend denied reports that its review was changed at the last minute after a personal appeal by the Chief of Defence Staff Sir Charles Guthrie to Prime Minister Tony Blair.

Defence sources, however, said Sir Charles had met Mr Blair and discussed the budget last week. They also said the figures had only been finalised last week after negotiations which were settled "late in day".