Paying the price of war and peace

Paying the price of war and peace

By Mary Gahan BBC News Online business reporter

British peace-keepers could cost £2bn a year

Wars do not come cheap - even when the fighting is confined to a matter of weeks.

The speed of the Iraqi conflict means that the £3bn ($4.7bn) put aside by the chancellor to cover the cost of the war is probably only slightly short of the mark.

Most economists agree a figure of £3.5bn is more likely.

But, if he does need to find that extra half a billion pounds the Chancellor, Gordon Brown, is unlikely to be perturbed.

The total can still be met comfortably from financial reserves without health, education or any other departments being forced to make cuts in their budgets.

The cost of peace

Unfortunately for the chancellor, the bills are going to keep on mounting up long after the last shot has been fired.

If we could solve the Northern Ireland problem by withdrawing forces we could then spend the money saved on a garrison in Baghdad

Professor Keith Hartley, University of York

"As soon as we run over four to six weeks the figure starts going up, but we don't know by how much," says Mark Stoker, defence economist at the International Institute of Strategic Studies.

The biggest cost will be keeping troops on the ground in Iraq while the country is re-built, although there has been talk of British forces withdrawing within six months.

"If the UK had a peace-keeping force of 20,000 in Iraq that would cost an extra £2bn a year," says Mr Stoker.

Rebuilding Iraq

Professor Keith Hartley, a specialist in defence economics at York University agrees that leaving soldiers in Iraq will substantially increase costs.

£2bn is not anything to get too excited about given that we had large surpluses up until a couple of years ago

Mark Stoker, Defence economist

"It would be a commitment equal to the size of our commitment in Northern Ireland.

"But if we could solve the Northern Ireland problem by withdrawing forces we could then spend the money saved on a garrison in Baghdad."

Then there is the contribution to reconstructing the country.

Mr Stoker estimates a figure of at least $30bn and although the majority of that is likely to be paid by the United States there has been no agreement on the size of the UK's contribution.

'No free lunch'

Humanitarian aid will be less of a drain, but will still add to the overall bill.

The chancellor has mentioned putting aside a figure of £200m but Mr Stoker thinks it more likely that several hundred million will be needed over the next six months.

A submarine returns home but troops remain in Iraq

Even with these extra amounts, paying for the Iraqi conflict will not give Mr Brown sleepless nights when his overall budget deficit is about £30bn.

"The odd £2bn is not anything to get too excited about given that we had large surpluses up until a couple of years ago, because the chancellor looks at these things over the course of several years," Mr Stoker says.

But it still amounts to an increase in spending. "It's not a free lunch," says Professor Hartley.

"It would probably mean that the borrowing requirement would have to rise a bit more, but in the scheme of things it would probably not be that noticeable."

Hoping for the best

Professor Hartley also points out that spending can always be moved to make it easier to pay for higher bills.

So, for example, defence spending on military equipment could be spread over several years.

The biggest threat for the chancellor was that the war would delay any economic recovery in the UK.

But fighting in Iraq has ended with world oil prices at reasonable levels and stock markets holding steady.

The difficult period of uncertainty about the war is over, but the chancellor still has to cross his fingers and hope that a strong economic recovery will follow.