State involvement cannot be ruled out in a hack of an armed forces payroll system, the defence secretary has said.

Grant Shapps told MPs the government had reason to believe the hack “was the suspected work of a malign actor” – and the BBC understands that ministers suspect China was responsible.

The system used by the Ministry of Defence (MoD) includes names and bank details of armed forces personnel.

China described the suggestion as a “fabricated and malicious slander”.

Labour’s shadow defence secretary John Healey has alleged that the external contractor in charge of the hacked system was Shared Services Connected Ltd (SSCL).