Crisis warning as forces get £400m boost

The armed forces got a £400m emergency hand-out as Tony Blair refused to give a deadline for withdrawing troops from Iraq. The allocation brings spending on Iraq, Afghanistan and the war on terrorism to £4.9bn - the equivalent of more than a penny on the basic rate of income tax.

The armed forces got a £400m emergency hand-out as Tony Blair refused to give a deadline for withdrawing troops from Iraq. The allocation brings spending on Iraq, Afghanistan and the war on terrorism to £4.9bn - the equivalent of more than a penny on the basic rate of income tax.

About £4bn of that is represented by the continuing commitment in Iraq, where Britain has 8,850 troops.

Gordon Brown told MPs defence spending in 2007-08 would be £3.7bn higher than this year. He said: "It is because our public finances are strong we have also been able to meet the extra and unanticipated costs of Iraq, Afghanistan and the fight against terrorism, in total £4.9bn." Ministers had hoped to start scaling back numbers of soldiers in Iraq after its elections in January. But the Army has been forced to send 650 more troops to fill the gap left because the Dutch withdrew.

The Ukrainians are also leaving and the Poles are halving their numbers. The Italian Prime Minister, Silvio Berlusconi, also wants a pullout of his troops, possibly in September.

Mr Brown's announcement triggered angry Commons exchanges between Tony Blair and Charles Kennedy, the Liberal Democrat leader, who said: "Many of us remain of the view we should set a deadline for withdrawal." But the Prime Minister said: "We should withdraw when the job is done, not before." And he said of the Italians: "Their position isthe same as ours, which is that there should be a build-up of the Iraqi forces so security is increasingly taken over by the Iraqi forces."

The Chancellor announced that from next month, compensation payments for injured service personnel would no longer be taxed. At present, payments are taxed when they stay on in the forces but not if they leave. Tom House, head of pensions at the Royal British Legion, said: "Such awards should not be subject to tax."