Who will pay for the war?

America's latest weapon - the AC-130 gunship. Cost: $190m each

The Saudis and Japanese helped pick up the tab for the Gulf War. How much will the current conflict cost, and who will pay for it, asks BBC News Online's Jonathan Duffy.

Considering the destructive capabilities of a Cruise missile, it may sound heartless to highlight their cost. But at £400,000 each they don't come cheap.

On the first night of attacks against the Taleban, the United States and Britain managed to burn a £20 million hole in their collective pocket by firing off 50 Cruise missiles in a few hours.

£400,000 each - a Cruise missile fired from HMS Splendid

The following night another £6m went up in smoke when the Americans unleashed 15 more of the deadly computer-guided projectiles.

And so it goes on. The Cruise missile costs are just the tip of the iceberg. Since air strikes on Afghanistan started nine days ago, the US and UK have unleashed an armoury of costly firepower.

Modern warfare is an expensive business and until five weeks ago, no one had budgeted for this military campaign. So, who will pay?

To answer that we have to first know how much the current war is likely to cost and, at the moment, hard figures are difficult to come by.

'Too early to say'

Shortly after the 11 September attacks, President George Bush secured an extra $40bn to deal with the crisis - about half of this is expected to go towards the war effort.

The Falklands conflict cost about £2bn in total

In Britain, the Treasury says it is too early to put a price tag on the current conflict. However, clues can be found in previous wars.

Despite the grand shows of military hardware, modern-day wars are not as pricey as they sometimes appear.

According to independent analysts Capital Economics, the cost to Britain of the 1999 war in Kosovo was about £600m.

The 1991 Gulf War came in at about $80bn overall, but much of that was shared between countries such as Kuwait, Saudi Arabia, Germany and Japan, which pledged money over manpower.

Profit through war

Britain got back about £2bn from the fund, leaving it with a net cost of £0.6bn, while the United States is said to have actually made a small profit from the arrangement.

UK involvement so far

800 troops

Three Royal Navy submarines

RAF reconnaissance and refuelling planes

The bottom line for the 1982 Falklands campaign was about £700m, although a further £1.3bn went on protecting the islands.

These sums are not to be sniffed at, but they are small compared to the wider economy. The Falklands was equivalent to just 0.3% of GDP while the net cost of the Gulf War was even lower.

"At the moment, the cost to the UK of the war on terrorism is relatively little because we are not doing much," says Mark Stoker, of the International Institute for Strategic Studies.

Compared to Kuwait and Kosovo, this has been a low intensity war. The number of sorties flown and ordnance dropped is relatively small because the Taleban has so few targets.

Second round

The main expenses are ordnance, fuel and maintenance for aircraft and ships and personnel - troops on a "war footing" get extra payments.

Consumer confidence is still high in the UK

Another concern is what economist Ron Smith, of Birkbeck College, calls "second round economic disruption" caused by a collapse in consumer confidence.

There is no sign of this yet - indeed consumer activity in the UK seems to be holding up well.

But this war is far from over. Where the Falklands, the Gulf, Bosnia and Kosovo were concluded in a matter of weeks, President Bush has said the war on terrorism could last for a decade.

"The endgame of this conflict is not apparent. Given the alleged support of this network around the world, toppling the Taleban could be only the start," says defence economist Digby Waller.

Costs could soar

The ability to define it and put a cost on it is "impossible" he says.

What Afghanistan lacks - an oil refinery

The big worry is that hostilities will spread across the Gulf. And if large numbers of ground forces are needed, "the costs will be much higher," says Mr Waller.

There is also the increased cost of policing the war on the home front.

President Bush has already started an Office for Homeland Security and in the UK the Home Secretary, David Blunkett, has unveiled a raft of new anti-terrorist measures that will not come cheap.

And, unlike the Gulf War, it looks like the UK and US will be paying their own way. The Treasury says there is no likelihood of third party nations picking up the tab.

Lacking the black stuff

"The Gulf War was all about oil. Having invaded Kuwait, Iraq's next port of call could have been Saudi Arabia. But there are no vested interests in Afghanistan," says Mr Waller.

There is however, some scope for spreading the cost. Germany, France, Canada and Australia have all pledged military support.

Another channel that could be explored, says Mr Waller, is the agreements America has with foreign states such as South Korea to stage troops on their soil.

Some countries pay the US for such a presence and America may choose to levy a further charge as indirect payment for the current war, he says.

But even that will only cover a fraction of the cost. Likely as not, the bulk of it will be paid by the British and American taxpayers.