Cost of War

Paper Summary:

This paper briefly examines why estimating the cost of the Iraqi war to the United Kingdom is difficult. Direct costs by the government to finance the war and to make necessary postwar efforts are the easiest component. But, on top of this are many other secondary components such as the impact on consumer and business behavior, the effect of taxes or other fiscal measures to finance the war, and the allocation of lucrative business deals following the conflict. This paper explores these elements and concludes that Britain's economy has suffered only slightly from the effects of the war on Iraq.

From the Paper:

"Gordon Brown, the United Kingdom's chancellor of the Exchequer (equivalent to the U.S. Treasury Secretary), stated that he had set aside 3 billion pounds ($4.69 billion) in a special reserve to finance the war. He also earmarked another 240 million pounds ($375 million) for postwar humanitarian aid to the Iraqis and 330 million pounds ($516 million) for domestic counterterrorist measures. Analysts have surmised that the cost of the war is well within the bounds of the promised $4.69 billion limit (Jun). To finance the war, Britain is relying primarily on increasing the level of government borrowing rather than raising taxes, although it did levy additional taxes on beer, wine and cigarettes (Wendling). "

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