Defence Minister John Spellar has admitted the Army is under financial pressure as a result of its operations across the globe.

The admission came as the government announced an inquiry to find the mole who leaked a report which suggested British soldiers were handicapped by major equipment failings during Nato's advance into Kosovo last year.

The Ministry of Defence document suggested there were a series of communication, equipment and command problems which could have led to serious difficulties if the Serbs had attacked Nato forces.

Shadow defence secretary Iain Duncan Smith claimed the disclosures amounted to proof that ministers were trying to get "defence on the cheap".

But Mr Spellar argued that the report, carried out as part of the MoD account of lessons learnt from the conflict, showed that the Nato operation was "extraordinarily successful".

He said the report concluded that the "battle group was able to deploy rapidly at short notice into theatre with mission essential equipment ready to conduct war fighting".

'Pressure on our budget'

But the minister accepted that radios used by British soldiers in Kosovo were old and required repair, and light machine guns were not in a "satisfactory position".

He added: "We are under some pressure as a result of a considerable range of operations in the last year - all of those dictated by outside events, all of those absolutely right to undertake, particularly in Kosovo and East Timor.

"But we do accept that is putting pressure on our budget and obviously we are in discussions with the Treasury on that."

Mr Spellar said some MoD land and buildings were being disposed of to meet the financial shortfall.

The department was also improving the way equipment was obtained in terms of price and how quickly it came into service, he added.

The leaked report, drawn up by senior Army officers, said British troops who formed part of the Nato force (K-For) which ushered Serb forces out of Kosovo, last summer, were issued with "unreliable" guns.

It also claimed that up to a third of personal radios were broken at any one time, that there was a shortage of night vision equipment, command lines were "confused and fractured" and that intelligence information was not well used.

Report is 'a partial view'

But the former K-For commander, General Sir Mike Jackson, has denied suggestions that British troops were ill-prepared for battle in Kosovo.

He said many of the report�s criticisms were "difficult to recognise" from his own experience.

Gen Jackson said: "It is important to understand, I think, that such reports are the partial view of the commander who writes them.

"It's his perspective - it may not necessarily be the complete perspective and the overall context is essential."

Tory spokesman Mr Duncan Smith called for a full inquiry.

"Without such an inquiry we will not be able to say to the government, and the government will not be able to admit, that in fact what they are trying to get now is defence on the cheap, and they will not be able to rectify these problems."

Liberal Democrat defence spokesman Menzies Campbell said the leaked reports demonstrated "you cannot have defence on the cheap".

"We have paid a heavy price for the long years of the systematic raiding of the defence budget by the Tories during 18 years of government," he warned.

Labour's Bruce George, chairman of the Commons select committee on defence, said he wanted to see action taken on the apparent shortcomings.

"The defence committee produced a report on the Strategic Defence Review and we reached the conclusion that if the government wished to achieve its objectives politically and militarily, then defence expenditure would have to rise beyond the rather miserable level to which it has sunk over the last 15 years," he said.