Work and Pensions minister Mel Stride said the attack was on a system run by an outside firm but was still a "very significant matter".

Tobias Ellwood, a former minister in the Conservative government, said the attack had targeted a third party payroll system used by the Ministry of Defence and had all the hallmarks of a Chinese cyber attack.

"Targeting the names of the payroll system and service personnel's bank details, this does point to China because it can be as part of a plan, a strategy to see who might be coerced,", the ex-soldier and former chairman of a parliamentary defence committee, told BBC Radio.

The data breach is believed to have included the names, bank details and in some cases personal addresses of serving and former armed forces members.

Stride told Sky News the Ministry of Defence acted "very swiftly" to take the database off line.

But, he said, the government was not currently pointing the finger at Beijing.

"That is an assumption.... we are not saying that at this precise moment," he added.

Defence Secretary Grant Shapps will give further details to the parliament later in the day.