Gordon Brown is refusing to fund up to £500 million of the cost of the Iraq war, according to defence analysts.

The chancellor told MPs on Budget day that he would fund the cost of the war in full, making £1 billion available.

But with the total cost of the war beyond £5 billion, the Treasury is said to have reneged on the deal to fund the urgent operational requirements in full, claiming that the armed forces should already have had the equipment they bought, or would have expended the supplies used as part of normal operations.

At least £200 million has been withheld so far, according to the journal Defence Analysis, with the final figure expected to be as much as £500 million.