The government's spending watchdog has called for immediate action to halt spiralling compensation claims against the Ministry of Defence.

The National Audit Office revealed that compensation and legal costs have risen from £25 million in 1992/93 to nearly £100 million in 2001/02.

Whilst the increase is "mainly due to factors outside the MoD's control", the report called for greater cooperation between those who deal with risks, incidents and claims within the department.

The MoD estimates that the hidden costs of a claim are about six times the compensation paid.

And the watchdog warns that there are number of new claim areas, such as Gulf War illness, potentially in the pipeline.

The report noted that the MoD has taken "a number of steps" to improve its handling of claims.

And it suggests that improvements could be made in the time it takes to process claims.

"Despite this, the MoD should do more to reduce the time and cost," said the study.

And the NAO warned that "many incidents are avoidable" and do not take place in the battlefield or in combat training.

The report also identifies problems with the quality of the MoD's data on incidents.

"Despite good guidance, the quality of the risk assessments undertaken to prevent incidents and the investigation of incidents when they occurred was mixed," added the report.

"While the MoD has taken steps to improve the way it prevents incidents and handles claims for compensation, there is no room for complacency," NAO chief Sir John Bourn said.

"Many incidents could be avoided and there are a number of steps the MoD should take to improve prevention.

"When things do go wrong, the result is often a personal tragedy for claimants and their families.

"It is therefore only right that MoD provide recompense in a timely and efficient way, and pay closer attention to the non-financial needs of claimants, including apologising where it is genuinely at fault."

The opposition seized on the report, describing the scale of the compensation claims as "shocking".

"The MoD has to learn lessons, in particular in improving the way it prevents incidents and accidents that lead to claims, and the way in which it handles these claims," shadow defence minister Keith Simpson said.

"It is obvious that given the training and tempo of operations, we will see more accidents and incidents. Not only that, we live in an age in which there is an increase in litigation."