Britain will “lead from the front” on defence spending and do “whatever it takes” to keep the country safe, Wes Streeting has said in a message of reassurance to the US and other Nato allies ahead of the Budget.
Chancellor John Healey – who quit as defence secretary in a row over funding for the military – is expected to announce he will borrow billions to boost defence spending on Wednesday.
However, the cash boost may not be enough to head off criticism over reaching a clear target of 3 per cent of GDP on defence by 2030 – a decision he is expected to delay until next year’s spending review – amid fears that Russia could strike a Nato country by the end of the decade.
Yet even if the target is delayed, the Chancellor and Defence Secretary are set to send a clear message to Nato allies, including Donald Trump, that the UK is fully committed to funding the military and national security.
Ahead of Healey’s first Budget, Streeting told The i Paper: “We are Nato’s third biggest defence spender and we are determined to lead from the front.
“We are working with our closest European partners, including through the E5 (Germany, Poland, France, Italy and the UK – Europe’s largest military powers), to strengthen our defences and deliver on our Nato commitments.
“We have a Chancellor with a strong record of backing our Armed Forces, and we will do whatever it takes to keep Britain and our allies safe.”
Trump has repeatedly criticised the UK and other Nato allies over their defence spending, and threatened to leave the alliance if it is not increased. Such a move would make Europe increasingly vulnerable to attacks from Russia.
Healey resigned as defence secretary under Sir Keir Starmer in June with a scathing attack on Starmer and former chancellor Rachel Reeves that the Treasury were refusing to commit to 3 per cent GDP on defence by 2030, as a milestone towards the Nato target of 3.5 per cent by 2035. The UK currently spends 2.6 per cent.
But with the public finances even more constrained since he left the Ministry of Defence (MoD), Healey is unlikely to find the money to reach the 3 per cent target and is expected to set this out in next year’s spending review.
Yet there will be some cash for defence: first through extra money for the UK’s two government investment funds, the National Wealth Fund and British Business Bank, which can then be ploughed into UK defence companies that manufacture drones and other military technologies.
The manoeuvre will be funded by extra borrowing but will not break the government’s fiscal rules as it is borrowing to invest.
A Treasury spokesperson said: “This additional capital will help more British businesses fulfil their potential, while getting investment behind the industries, infrastructure and places that create good jobs and drive lasting growth across the country.”
An extra £20.4bn will go to the two state funds, although not all of the money will be for defence. The Financial Times reported that £15.4bn will go to the National Wealth Fund, the state’s infrastructure bank, and £5bn to the British Business Bank.
But the Conservatives told The i Paper this approach is “PFI-ing the country”.
In a second move, Healey is expected to confirm he is funding the £4.7bn black hole in the Defence Investment Plan (DIP) left to him by Reeves.
Healey will spare the Department for Transport (DfT) from further cuts after the ministry’s capital budget was raided to fund the DIP in July, leading to several roads projects being put on hold. The i Paper understands this July raid is the limit of what the Chancellor will take from DfT.
But other Whitehall capital budgets, including the MoD’s own, as well as the heat pump subsidy budget from the Department for Energy Security, are expected to take a trim to fund the shortfall.
Shadow Chancellor Andrew Griffith urged the Chancellor to make defence spending a higher priority in the Budget and argued that cuts to heat pump subsidies will not be enough to plug the funding gap.
Griffith accused Healey of failing to deliver the defence investment he had demanded before quitting as defence secretary, and called on him to find the money by tackling welfare spending.
The shadow Chancellor told The i Paper: “It’s hard to stop an enemy missile with a heat pump. Defence of the realm has to be a higher priority.
“But trimming a few hundred million off one subsidy is not a defence plan. Healey resigned as defence secretary warning that Labour’s plans would leave Britain less safe, and he is still nowhere near fixing it.
“I found the money to spend 3 per cent of GDP on defence in my first week as shadow Chancellor by tackling out of control welfare. Healey needs to do the same.”
The Boiler Upgrade Scheme, which covers England and Wales, provides grants of £7,500 towards heat pumps, rising to £9,000 for some properties off the gas grid. The reported cuts would reduce its £2.7bn five-year budget, rather than abolish the scheme altogether.
The savings form part of a wider effort to fund a £15bn increase in defence spending over four years.