Keir Starmer seeks to push forward with delayed defence investment plan
Meeting convened by UK prime minister comes as officials examine ways of overriding multi-billion pound funding gap
Sir Keir Starmer will seek to break the deadlock over the delayed defence investment plan on Tuesday, as government officials examine creative solutions to override a multi-billion pound funding gap facing the UK military.
The prime minister will convene advisers to make progress on the blueprint, with further conversations lined up in the weeks ahead, according to people familiar with the situation.
The defence investment plan was initially expected last autumn but has repeatedly been postponed. The plan is intended to reveal details of how the government will fund its strategic defence review, which reported last June.
Recommendations in the SDR cost at least £67.6bn through to the late 2030s, according to previously detailed costings and estimates from industry experts of new announcements.
While ministers accepted all the recommendations, last month the head of the military admitted that, without more funding, the Ministry of Defence would have to deliver cuts to existing programmes.
In addition to domestic pressure on Starmer’s leadership, US President Donald Trump’s recent threats to Nato allies are likely to make the idea of defence cuts even more politically unpalatable.
Work is now under way across Whitehall to explore potential options to overcome a defence funding black hole of up to £28bn over the next decade, people familiar with the situation said.
The discussions about all the options remain at an early stage. Even the timescale for the defence investment plan remains uncertain, with dates for publication ranging from mid-March to May.
These include proposals for fresh public-private partnerships that leverage private finance to bolster defence as well as for a new multilateral defence bank with UK allies.
Officials are also examining proposals to fund billions of pounds of defence spending by easing chancellor Rachel Reeves’ fiscal rules, following the precedent set within the EU last year, the people said.
The Treasury is fiercely resistant to the idea, however, and a government spokesperson said: “Our fiscal rules are non-negotiable and will get borrowing down while supporting investment.”
Reeves signalled last year that the UK would not lift defence and intelligence spending beyond 2.6 per cent of GDP until the next parliament.
She has repeatedly said her fiscal rules are ironclad after putting in place a revised framework on taking office in 2024. This requires her to balance the current budget excluding investment by the end of the parliament and to have public debt falling as a share of GDP by the same year.
Any changes to that regime would be risky given the need to retain investor confidence in the Treasury’s ability to drive down the budget deficit.
Max Warner, economist at the Institute for Fiscal Studies think-tank, said it might be possible to achieve a “temporary increase” in borrowing as part of the transition to higher defence spending. But he cautioned: “It seems hard to justify a permanent increase in borrowing for defence.”
Reeves in her November Budget sought to strengthen her fiscal credibility by doubling the headroom against her key borrowing rule to over £20bn. The change landed favourably in financial markets and has helped keep gilt yields relatively steady since.
Last year the EU temporarily loosened its fiscal rules to allow countries to spend more on defence, in response to growing US pressure on the bloc to invest more in its own security.
Germany and 15 other nations have invoked a clause that allows them to spend up to 1.5 per cent of GDP on defence over four years without breaking Brussels’ deficit rules for member states.
The idea of boosting UK government borrowing outside Reeves’ fiscal rules is backed by senior defence figures.
General Sir Richard Barrons, a former senior UK military commander and one of the co-authors of the SDR, said: “It’s the only credible solution to the problem the government has. There is a gap of £28bn over the next four years, which you can’t close by ‘reprofiling’ or trying to bung it later.”
“If you have exhausted the normal things you usually do to manage a gap, you either have to have less of the capabilities within the SDR or more money sooner to fund the SDR in full.”
The government said: “The defence investment plan will set out the MoD’s plans to ensure resources are directed effectively to meet its priorities and deliver value for taxpayers. We are working hard to finalise this, and it will be published as soon as possible.”