John Healey, USA News (London, United Kingdom): John Healey is set to announce billions in defence spending in Wednesday’s Budget. He will also invest in the National Wealth Fund and British Business Bank, two separate Government funds. Those funds will, in turn, invest in British defence companies, generating jobs and economic development. But questions have already been raised around funding.
The investment would be generated by long-term borrowing, but would not break Labour’s fiscal rules because it should generate returns. The surprise announcement comes as Mr Healey is under pressure to increase defence spending to three per cent of GDP by 2030, a target he himself set, and quit Sir Keir Starmer’s Cabinet over. All Nato allies have committed to spending 3.5 per cent of GDP on defence by 2035. The UK currently spends around 2.6 per cent of GDP on core defence spending, but critics and Mr Healey have called for an increase to ensure a clear timetable to reach the alliance’s target.
Funding and Political Reactions
Mr Healey previously said he would lay out a path to hitting the target at the 2027 spending review. The investment at the Budget will serve as a “down payment” on his three per cent ambition, according to The Times. Shadow Chancellor Andrew Griffith on Saturday demanded Mr Healey resign if the UK fails to set out how it will reach the target he himself set.
Mr Griffith stated that by the end of the Budget statement, Mr Healey must have fully funded three per cent defence spending, or resign, adding that the country is living in an era of extraordinary threats while the Chancellor dithers over funding. The Conservatives have stated they would fund defence by cutting benefits.
Mr Healey will make the investments by using long-term borrowing and may draw criticism from political opponents. One of Rachel Reeves’ fiscal rules requires public debt to fall as a share of GDP within three years, but the rule was defined to allow borrowing for investment in public financial institutions that could generate a return. This means that investment into public financial institutions will not appear on the Treasury scorecard.
Opposition Responses
James Cartlidge, the Conservative Shadow Defence Secretary, welcomed the plans and accused the Government of copying a similar policy unveiled last December to create a sovereign defence fund. He noted that a key part of this involved making the National Wealth Fund switch its investment from Net Zero to defence, welcoming Labour adopting the approach to support UK start-ups and defence tech businesses. Mr Cartlidge suggested the investment should be used to accelerate the uncrewed, artificial intelligence-driven transformation of the armed forces.
Defence Secretary Wes Streeting defended the Government’s approach to defence spending, placing blame on the Conservatives for failing to invest during their time in government. Mr Streeting claimed the Conservatives shrunk the British Army to its smallest size since the Napoleonic era and left a £17 billion hole in the equipment plan.
