Iraqi war bill weighs on US and UK

Analysis
By Brian Wheeler
BBC News Online business reporter

Reconstruction is a slow process

The White House revealed this week that the cost of maintaining a force in Iraq would help push the US budget deficit to $455bn (£285bn).

That is about 50% higher than previous forecasts.

It puts the United States on course for a record shortfall, bigger even that suffered during the Reagan years.

Add to that a stagnant economy and escalating unemployment and the economic pressure on President George W Bush could hardly be greater.

Prime Minister Tony Blair is under domestic pressure of a different kind - to deliver long-awaited improvements to the UK's crumbling infrastructure.

The escalating bill for keeping troops in Iraq is likely to prove a major headache for both men in the coming months.

But President Bush would appear to have the bigger problem.

US costs double

The emergency $75bn cleared earlier this year by Congress to cover the cost of operations in Iraq is beginning to look increasingly puny.

Of that, only about $12bn is thought to have been set aside for the post-war transition period.

The latest estimate is that the net additional cost of operations in Iraq for 2002-03 will not exceed £1bn Adam Ingram, UK defence minister

This was meant to last a few months, but the Bush administration now admits its troops will be in Iraq for considerably longer.

Defence Secretary Donald Rumsfeld recently told Congress the US presence in Iraq is costing $3.9bn a month, roughly double Pentagon estimates from before the war.

UK estimates

The US is maintaining a much larger force - about 145,000 troops - than originally envisaged by planners, who expected more countries to help out.

The UK, by contrast, has just 11,000 troops stationed in southern Iraq, and the plan is to gradually replace them with soldiers from other countries.

It also appears to be staying close to its original cost estimates.

The Treasury has said the total cost of military operations in Iraq, in the current financial year, will not exceed the £3bn.

That was the figure set aside by Chancellor Gordon Brown in his last Budget.

In addition, the government has handed over £210m for reconstruction and humanitarian work.

And a further £60m has been earmarked to help the United Nations agencies, the Red Cross and the Red Crescent and other non-governmental organisations.

Fighting costs

The military campaign is being paid for out of the Treasury's emergency reserves - thought to be about £6bn.

There is no indication - so far - that the MoD will have to ask for more cash - or use funds set aside for domestic priorities such as schools and hospitals.

About £1bn was spent by the UK in Iraq before a shot was fired in anger, according to the ministry of defence.

This was spent upgrading Challenger 2 tanks to cope with the desert sands and other preparations for war.

The cost of the actual fighting is still being worked out, with every missile and shot fired to be accounted for.

Ministers are reluctant to talk about the cost of keeping troops in Iraq.

Premature

Chief Secretary to the Treasury, Paul Boateng, recently declined to give a precise monthly breakdown of the cost of keeping troops in Iraq.

In reply to a written question from Liberal Democrat foreign affairs spokesman Menzies Campbell, Mr Boateng said: "It would be premature to make an estimate of the total costs of the recent military campaign in Iraq.

"The Chancellor announced in the Budget a £3bn special reserve."

The closest indication of day-to-day running costs for the British force in Iraq came in an another written answer earlier this month.

Defence minister Adam Ingram said: "Calculating all the costs of military action will take some time to determine since it will include the cost of ammunition, bombs and guided weapons consumed in excess of peacetime levels and the cost of equipment destroyed and damaged.

"These sums are likely to be significant.

"However, excluding costs of war-fighting (essentially those described above), the latest estimate is that the net additional cost of operations in Iraq for 2002-03 will not exceed £1bn."

Confident

Working with these figures, we can estimate that the cost per month of post-war operations in Iraq is about £83m.

Add the £10m a month the MoD says is being spent on humanitarian aid, and the £20m being spent on camps for displaced people, and the total is £113m a month - or about £4m a day.

The MoD refused to comment on the accuracy of these estimates.

A spokesman said the final figure could well be higher than that, once the full cost of equipment loss has been taken into account.

The overall costs were still being calculated and would be made known to the National Audit Office within a few weeks, he added.

He said ministers were still confident of staying within budget.