The UK has spent �700m on military operations

Any attempt to save money was par for the course at this time of year, said the defence secretary.

Mr Hoon said he was not depressed by ongoing attacks in Iraq, saying that in areas controlled by UK forces life was largely returning to normal.

But he added that the security situation in and around Baghdad remained a cause for concern.

On Tuesday it emerged that British marine Corporal Ian Plank had been killed in action, bringing the total of UK dead since the end of major hostilities on 1 May to 19.

A total of 52 British personnel have died since the war began.

Cpl Plank died on 31 October but news of his death was withheld for "operational reasons".

Iraq budget

So far British involvement in the Iraq war and its aftermath has cost UK taxpayers more than �1.25bn, the government has confirmed.

Cpl Plank was killed by hostile fire

The bulk of the money - an estimated �700m - went on military operations.

Foreign Secretary Jack Straw warned last week that it was too early to predict how much further those costs would rise.

Chancellor Gordon Brown set aside a special reserve of �3bn in this year's Budget to cover the cost of UK involvement in Iraq.

Questioned about reports there was a squeeze on defence spending Mr Hoon said any savings were part of a normal annual cycle.

"We are not looking for cuts," he told BBC Radio 4's Today programme.

"What we are doing - and there's been some publicity about this in recent days - at this time of year and in particular if you look back at the cuts this time last year, large spending departments like the MoD have to ensure that as we look towards the end of the financial year ... that we do not overshoot our budget so there are some sensible plans underway."

Calm?

Mr Hoon said his previous experience of Sierra Leone and in the Balkans had taught him that after "major combat" peacekeeping operations were often faced with "real challenges".

But he added that in "most parts of Iraq, most parts of Baghdad" the security situation remained calm.

The defence secretary added that did not mean that US-led forces were being complacent about attacks.

Mr Hoon was also quizzed about UK involvement in an EU defence project.

He said Britain would not participate if the EU established a planning capability in competition with NATO.

"We have made it quite clear that we see no benefit in having an operational planning capability that duplicates Nato or is separate from national headquarters," he said.

"We would not participate because we can see no practical advantage to European capabilities as far as that is concerned."

Last week Mr Straw issued a written statement confirming the �544m commitment to Iraq's reconstruction announced by International Development Secretary Hilary Benn.

Security

The government also plans to spend �1.3m on security posts in this financial year.

Additional security at diplomatic posts in the Middle East cost �5.62m.

It is too early to predict the continuing costs of military deployment Jack Straw Soldiers honoured for Iraq bravery

By the end of 2003-4 up to �12.1m will have been spent on the British Office in Baghdad and other bilateral representation.

Over the same period an extra �1.8m is expected to have been spent on Iraq-related costs outside the Gulf state.

Mr Straw said: "The government has not so far committed any other amounts in connection with the United Kingdom's involvement in Iraq.

"It is too early to predict the continuing costs of military deployment, support for the Coalition Provisional Authority and the development of bilateral relations beyond the end of this financial year."