defence spending, USA News (London): Britain will lead from the front on defence spending and do whatever it takes to keep the country safe, Wes Streeting has stated in a message of reassurance to the US and other NATO allies ahead of the Budget. Chancellor John Healey—who previously quit as defence secretary in a row over military funding—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. 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 that Britain is NATO’s third biggest defence spender and is determined to lead from the front, working with European partners like the E5 to strengthen defences and deliver on NATO commitments.
Funding Mechanisms and Borrowing
Trump has repeatedly criticized the UK and other NATO allies over defence spending and threatened to leave the alliance if contributions are not increased. Healey resigned as defence secretary under Sir Keir Starmer in June, criticizing the Treasury for refusing to commit to 3 per cent GDP on defence by 2030 toward a NATO milestone of 3.5 per cent by 2035. The UK currently spends 2.6 per cent.
With public finances constrained, Healey is unlikely to reach the 3 per cent target immediately. Instead, he will provide extra money through government investment funds—the National Wealth Fund and British Business Bank—to be funneled into UK defence companies manufacturing drones and military technologies. Funded by extra borrowing, this manoeuvre will not break fiscal rules as it constitutes borrowing to invest. A Treasury spokesperson noted this additional capital will help British businesses fulfill their potential and drive growth.
An extra £20.4bn will go to the two state funds, with £15.4bn allocated to the National Wealth Fund and £5bn to the British Business Bank, though not all funds are exclusively for defence. The Conservatives criticized the approach.
Deficit Coverage and Departmental Impacts
In a second move, Healey is expected to confirm he is funding the £4.7bn black hole in the Defence Investment Plan left by former chancellor Rachel Reeves. Healey will spare the Department for Transport from further cuts, but other Whitehall capital budgets, including the MoD and the Department for Energy Security’s heat pump subsidy budget, are expected to take a trim.
Shadow Chancellor Andrew Griffith urged the Chancellor to prioritize defence spending further and argued that heat pump subsidy cuts will not plug the gap, calling instead for welfare spending reductions to source the necessary funds.
