Last night Ministers were accused of being "in denial" over an Army manpower crisis after figures emerged showing that although 678 serving Army personnel tested positive in compulsory drug tests last year only 610 soldiers were discharged.

Cocaine use in the Army has increased threefold in five years, and soldiers were also found to have taken other Class A drugs such as heroin and Ecstasy.

The total number of failed drug tests was, however, down on 2006, when 769 Army personnel tested positive for illegal substances and 608 were discharged.

Patrick Mercer, Tory MP for Newark and Retford and a former Army commanding officer, said the decision to allow drug-taking soldiers to remain in the Army proved there was a staffing crisis in the military.

"I'm delighted that there seems to be less drug-taking going on inside the Army; that's got to be a good thing," he said.

"But if the Secretary of State for Defence is talking about zero tolerance then there has to be zero tolerance. It's like 'almost being' a virgin; you either are or you aren't.

"This underlines the immense crisis in staffing and manpower in the Army, about which the Government is completely in denial.

"We wouldn't be keeping people with these sorts of offences to their name were the manning situation not dire."

Among the Army personnel who failed drug tests last year were 84 soldiers at the Infantry Training Centre at Catterick Garrison.

Twenty-two members of the Yorkshire Regiment tested positive, and there were two failed tests at the Army Foundation College in Harrogate.

Drug-taking was also detected at 10 other Yorkshire-based battalions or units.

Defence Secretary Des Browne insisted last December that the Government would not budge from its zero-tolerance approach on drugs in the armed forces.

"I'm sorry that all of these young people have to lose their jobs and their career opportunities, but that is how it will have to be because we do not tolerate drug use in the military," he said.

Prof Sheila Bird, senior scientist with the Medical Research Council, has found that cocaine use by Army personnel increased threefold between 2003 and 2007.

Her report, published by the Royal United Services Institute for Defence and Security Services, showed that soldiers were most likely to test positive on Mondays after enjoying a weekend off duty.

Prof Bird said that, rather than dismissing them, the Army should look to help soldiers found to have taken illegal substances.

"It should be possible to recover the situation for the soldier, for the Army and for the country."

A spokesman for the Ministry of Defence said last night: "All the armed services do not tolerate drug-taking.

"But we have an early intervention programme for those very junior soldiers that make a mistake and, for whatever reason, test positive for a substance.

"In certain cases these soldiers can be retained, but these are very, very exceptional cases."