John Healey must urgently divert spending from other Whitehall departments to fund defence because “the gloves are now off” when it comes to Russia’s hostile activity, military insiders say.
The Chancellor is expected to use his Budget on 28 October to fund the £4.7bn gap in the Defence Investment Plan left by Sir Keir Starmer, and is set to raid capital budgets across the Government to find the money.
But Labour and Conservative former defence ministers and military experts say Healey needs to go further and find more money for the Armed Forces to prepare for the escalating threat from Vladimir Putin.
Moscow’s heightened “grey-zone” activity and recent drone strikes on merchant shipping in the Black Sea in the past fortnight, killing a number of civilian crewmen, have alarmed defence industry insiders, who believe that a major hybrid warfare attack on the UK by Russia could be imminent.
It has even led to Defence Secretary Wes Streeting toughening the UK Government’s rhetoric against Russia, by labelling its grey-zone activity as “state-backed terrorism”.
But the Chancellor is likely to hold off from major decisions on funding the Armed Forces and kit until next year’s spending review, which could be as late as autumn 2027.
How the scale of the threat is growing
The messages from the UK Government’s own ministers and senior officials about the dangers posed by Moscow could not be clearer.
Streeting told the House of Commons Defence Committee this week that while the British public should be “alert but not alarmed” to the growing threat, “every single day Russia is testing us”.
And on Wednesday, UK politico-military counsellor Arron Newble warned fellow European states that the levels of spending on defence by Moscow – 44 per cent of federal budget outlays in the first half of 2026 – showed Russian “society is being reorganised around war”.
Former Labour defence secretary Lord Hutton told The i Paper that Streeting had “called it right” when describing Russia’s activities as “state-backed terrorism”.
The Kremlin’s involvement in the killing of Alexander Litvinenko with radioactive material in London in 2006 and the Salisbury poisonings of 2018 pass the “terrorist threshold”, Hutton said.
He added: “We’ve got to understand that the gloves are off, and [that] this is a very serious situation we’re facing.
“I think it would be better if we heard more from Government about the nature of these Russian threats and operations against the UK and our allies, because only then I think will the public really genuinely come to understand the seriousness of the situation and why so many people are saying now that we really have to invest significantly in our Armed Forces.”
What is needed immediately
When he stands to deliver his first Budget on 28 October, Healey is expected to outline how he will fund the £4.7bn shortfall in the Defence Investment Plan – the blueprint for boosting the UK’s military industrial base unveiled by the Starmer government in July.
Gen Sir Richard Barrons, co-author of the Strategic Defence Review, told The i Paper: “I think the die is cast for the Budget. The first challenge to overcome is making sure that the £4.7bn for the DIP that still needs to be identified has been found and allocated.
“Other than that, I think the current DIP settlement will be as good as it gets for this Budget.”
Barrons urged the Ministry of Defence to advance talks with the City and private sector about how private capital and expertise can be brought in to augment the public sector.
“This is very likely to be a much more promising way of funding defence better and sooner than trying to squeeze more public money in the short term.”
Britain has some air defence from drones and missiles, but this is not comprehensive and the only protection from ballistic missiles is from interceptors on board Type 45 Destroyers, which have to be in UK waters at the time.
The UK also has depleted ammunition stocks, with missiles being supplied to Ukraine for the past three years, and shortages of operational heavy armour. It also lacks ground-based air defence systems.
Last year’s Strategic Defence Review also said more early-warning aircraft and radar “would enable
the UK to maintain round-the-clock airborne surveillance”.
It added that the “the uncrewed aircraft Reaper and its successor Protector have been highly successful. Protector should be enhanced with maritime surveillance.” It called for new fast jet trainers, an upgrade of RAF Brize Norton and more RAF transport aircraft.
Military insiders want the Chancellor to go further
Defence spending as a share of GDP is set to rise to 2.7 per cent next year, but the UK has to meet a Nato commitment to spend 3.5 per cent by 2035.
Healey is under pressure to pledge reaching 3 per cent by 2030 as a “waymarker” to reassure Nato allies and the defence industry – particularly because intelligence suggests Russia could launch a military strike on the alliance by the end of this decade.
It was the Chancellor himself who, when he resigned as defence secretary in June, complained that the government was not committing to the 2030 date.
His Labour predecessor Lord Hutton said the Chancellor had to go faster on ramping up defence spending.
Hutton added: “I don’t dispute it’s difficult for him. He’s in a very tight straitjacket when it comes to public spending, but how many times have we heard people say it’s the government’s number one priority?
“But somehow that never seems to translate into additional resources being available. I think there’s a very high level of concern about that. I’ve made the case that we need right now a national rearmament programme, and it should start now.
“The thing about putting the extra spending off into the spending review, that doesn’t start to change departmental budgets until 2028. That’s too late.”
The Conservatives have pledged to increase spending to 3 per cent by cutting the welfare bill – which would allocate an extra £10bn a year for defence, £1bn of which would go towards their plan for a “Britannia Shield” to protect the UK from missile attacks.
Shadow Defence Secretary James Cartlidge said: “Instead of prioritising social security over national security, Labour urgently needs to set out a clear plan to get to 3 per cent, as we have done.
“John Healey resigned as defence secretary over the need to get to 3 per cent. Now that he is Chancellor he has nowhere to hide. Instead of yet more dither and delay, he must use the Budget later this month to set out his plan for 3 per cent.”
Barrons said: “The clock for confronting Nato and therefore the UK is owned firstly by Russia and what it decides to do in and around its struggling war in Ukraine and later with China as it advances beyond everybody else in many forms of military-relevant technology.
“So the current predicament whereby the Government plans to get defence to a better, more transformed place over 10 years remains firmly at odds with a darker world which could present serious risk of confrontation and conflict much sooner, maybe even next year.
“It is becoming supremely important that the public and private sector accept that the chances of being bounced by events is now very high and very dangerous.”
What should be cut to pay for it?
The UK spends about 10.9 per cent of GDP on welfare – which includes pensions as well as benefits – or around £334bn, and military experts have long called for this budget to be cut to fund defence.
But insiders say there are other areas that could also be targeted, including capital spending across Whitehall departments and even making the case for an increase in income tax.
Former defence minister Tobias Ellwood said: “Welfare is the obvious starting point. But given it’s our economy in the crosshairs – and if hit would be far more costly in the long run, we may need to consider a 1p increase in income tax.
“Where Government is failing is explaining the scale and imminence of the threat. If the British people were better informed about what’s coming over the hill [grey-zone attacks on the UK mainland] there would be more support for limited, ring-fenced tax rises.
“[For] example, the taxpayer cost on the [cyber attack] hit to Jaguar Land Rover was over £1bn. This type of attack will increase, along with sabotage and drone attacks unless we upgrade our resilience.”
Hutton said capital spending had to be prioritised “because primarily it’s a capital problem about getting new equipment, and investing in new kit”.
He cited the case of the government’s walking and cycling strategy, which is costing the state £4.5bn over the next four years, as something that could be cut to pay for defence.
The ex-Labour minister said that this expenditure “really sticks in my throat”, adding: “I think we should stop that and transfer that money. That’s a billion pounds a year extra for the MoD straight away.
“I think welfare spending needs to come down, but I’m not in favour of doing what the Conservatives suggested, which is to just slash benefit levels. That’s absolutely looking at the problem through the wrong lens.
“We’ve got to get more people into work. We’ve got to be tougher, I think, with particularly some benefit claimants about actively seeking work. We’ve certainly got to sort out the shambles of the sickness and incapacity benefit system, which is just leeching money and actually not doing its job at all in helping people get back into work.”