The cost of Britain’s military operations in Iraq and Afghanistan since 2003 is set to exceed £5 billion by next year, following Gordon Brown’s Budget announcement of a further £800 million for the two campaigns.

The Government is hoping that conditions in Iraq will stabilise to justify substantial troop withdrawals over the next 18 months. But the Chancellor’s approval of another injection of funds from the special reserve for 2006/2007 indicates that Iraq is still going to be a major drain on resources for the foreseeable future.

However, next year an increasing proportion of the extra cash will have to go towards the Afghan mission because of the planned deployment by July this year of a 3,300-strong battle group to Helmand province in the south.

This means that balancing the books for the two operations is going to become increasingly difficult next year unless the military presence in Iraq can be reduced.

John Reid, the Defence Secretary, announced this month that the 8,000-strong force in Iraq would be cut back by 800 in May when the next rotation of units takes place, but was unable to give any timetable for further cutbacks.

The financial burden arising from Operation Telic, codename for the mission in Iraq, is now well in excess of the Government’s original estimate for the mission.

In the 2003 Budget, the Government allocated £3 billion to cover "the full costs of the UK’s military obligations" in Iraq. However, the annual cost of the Iraq operation has shown that the original estimate was unrealistic.

In 2002/2003 the Government allocated £848 million for Iraq from the special reserves. This increased to £1.3 billion in 2003/2004, because it included the combat phase of the mission. In 2004/2005, the cost was still high, at £910 million, and the estimate for 2005/2006 is £1.3 billion, although this includes funding for the expanding operation in Afghanistan.

Mr Brown’s promise of another £800 million for next year will also have to be shared out between Operation Telic and Operation Herrick, codename for the peace-support mission in Afghanistan.

From 2002/2003 to 2006/2007, the Government, therefore, will have spent or pledged £5.2 billion for the operations in Iraq and Afghanistan.

Mr Brown also announced today an additional £200 million for other peacekeeping operations which would include Bosnia and Kosovo.

Liam Wren-Lewis of Iraq Analysis Group which has been studying the funding of Operation Telic, said: "The Government is providing no serious breakdown of where this money is going, nor any explanation as to why the cost of operations appears to be rising while spending on aid and reconstruction in Iraq dwindles."

He added: "After three years of effectively writing blank cheques for the MoD, it’s time that exact details of the special reserve allocations were made public, and a clear estimate given for the total cost of the conflict."

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