Chancellor John Healey is set to deliver an unexpected increase in defense spending at his first budget on Wednesday, as Britain strains to reach its NATO commitment to spend 3.5% of GDP on defense by 2035. Healey — who quit as defense secretary in the dying days of Keir Starmer’s government over a funding row — hopes he can show how Britain will start to reach that target now that he's safely ensconced in the powerful Treasury. Until last week, it was assumed that the top finance minister would defer decisions on ramping up funding until next year’s multi-year, government-wide spending review.
So Wednesday’s move could represent an early win for the Ministry of Defence in Prime Minister Andy Burnham's new government. But with regular warnings in the press and in public about Britain’s unpreparedness for conflict, there’s much more to watch for beyond Wednesday's headline hike. POLITICO walks through the seven key details and defense industry demands.
Healey's government-rocking resignation back in June was explicitly over a refusal in Downing Street and the Treasury to commit to spending 3% of GDP on defense by 2030. Now that he is leading the Treasury, Healey is under pressure to deliver on that. But even that keeps Britain shy of the bigger NATO aim.
On existing plans, U.K. defense spending is set to rise to 2.7% next year and remain flat until 2030. Healey's first move will be to fill the £4.7 billion black hole in defense funding in the Defence Investment Plan — meant to overhaul the armed forces and improve readiness — published earlier this year. More money is now expected beyond this, briefed to the media in recent days as a “down payment” towards spending 3% on defense by 2030.
But two government officials, granted anonymity like others in this article to discuss internal thinking, said the pathway to meeting NATO's larger, 3.5% target will only come in next year’s spending review, not the budget. Even on the smaller measure, the margins for the chancellor are tight, with government spending rules and debt targets leaving little room for maneuver. Mike Martin, an MP on the House of Commons Defense Committee, told POLITICO: “They have got themselves into a straitjacket over defense spending and none of this will be resolved before the next election.
This is why I think an early general election is inevitable.” Britain's defense industry has long called for more direct government spending on domestic contracts. But the sector also wants more private capital flowing into U.K. firms, and will be looking to Healey to set the conditions. The Financial Times reported last week that Healey will allocate £15.4 billion to the country’s National Wealth Fund and £5 billion to the British Business Bank — a share of which could end up with defense companies.
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