By Salma El-Sakka
Chancellor John Healey has told every government department to find 1% cuts in their capital budgets to fill a £4.7bn hole in the funding of the Defence Investment Plan. The reductions come on top of the 1% cuts departments were asked to make earlier this year to pay for the initial £10.3bn of the plan's overall £15bn price tag.
Additional cuts on top of earlier reductions
The plan boosted defence spending, but the chancellor continues to face pressure to explain how he will meet a further target of spending 3% of national income on defence by 2030. Capital budgets are focused on long-term investments rather than day-to-day spending; earlier this year, a number of major road improvement schemes were scrapped to fund the initial defence spending rise.
Pressure to meet 3% GDP target by 2030
Conservative leader Kemi Badenoch accused the chancellor of offering only "a plan to have a plan," adding: "I bet [Vladimir] Putin's really scared now." Setting out his Budget, Healey hinted that meeting the 3% goal would require further cuts, telling MPs it would involve "looking hard at public spending." He said he would set out how the UK would reach the 3% target by 2030, as well as 3.5% of GDP by 2035, at next year's spending review.
NATO Secretary General Mark Rutte said the UK was on "a credible path towards meeting the commitment made by all NATO Allies in The Hague." Chair of the Commons defence committee, Labour MP Tan Dhesi, said key decisions on defence spending had been delayed until next year's spending review, warning: "There is a cost to inaction." Former NATO Secretary General Lord Robertson called the Budget "pretty good news for defence generally" but warned of "battles ahead with the spending departments" to reach the 3% target.
Healey's resignation and current role
Earlier this year, Healey resigned as defence secretary, accusing then-Prime Minister Sir Keir Starmer of not providing enough money to keep the UK safe. In a scathing resignation letter, he emphasised his belief in the importance of reaching a 3% target by 2030. Now chancellor, Healey told the House of Commons: "At the spending review next year, I confirm that I will set out the details of how we will meet our NATO commitment to spend 3.5% of GDP on defence by 2035, with a target date for 3% in 2030. And today, I am getting work under way to get there in a fiscally sustainable way."
Innovative financing and private sector involvement
In addition to looking at public spending, Healey said he wanted to use "more innovative financing alongside the private sector and our international allies." This includes starting treaty negotiations with Finland, Poland and the Netherlands to set up a "multilateral defence mechanism" allowing allies to share resources, increasing private investment in defence through public-private partnerships, and directing the National Wealth Fund and British Business Bank to put £5bn into "defence, dual-use technology and sovereign capability." The Office for Budget Responsibility estimates the target to increase defence spending to 3.5% of GDP by 2035 will cost £35bn.
Ukraine support announced
In his Budget speech, Healey also announced £10bn of economic and military support for Ukraine, in the form of loans and export guarantees. The funding includes £5.5bn of loans through World Bank guarantees and a grant contribution to the World Bank International Development Association's crisis facility. A further £3bn will be made available through loans facilitated by UK Export Finance. Healey said the extra money would send "a clear message to Moscow" after a "brutal ballistic missile attack" by Russia. Ukrainian President Volodymyr Zelensky welcomed the support, saying: "Every step to strengthen Ukraine brings Russia closer to realising that it must end this war of its own making." The money comes on top of the UK's pledge to provide Ukraine with £3bn of military support until at least 2030-31.
