Healey asks departments for further 1% cuts to plug defence funding gap

Chancellor John Healey has told every government department to find a further 1% in capital-budget cuts to help plug a £4.7bn shortfall in the Defence Investment Plan, according to the BBC.

The cuts come on top of a 1% reduction departments were asked to make earlier this year to fund the plan’s initial £10.3bn. The plan is costed at £15bn overall, but departments have not yet decided which projects to cut.

Capital budgets pay for long-term investment rather than day-to-day services. Previous reductions to these budgets led to the cancellation of several major road schemes.

Healey’s announcement comes amid pressure to explain how the UK will meet its target of spending 3% of national income on defence by 2030. In his Budget, he said he would set out the route to that target, and to spending 3.5% of GDP by 2035, at next year’s spending review. The Office for Budget Responsibility estimates that reaching the 3.5% target would cost £35bn.

Conservative leader Kemi Badenoch criticised Healey for not explaining how he would reach the 3% target, saying he had offered “a plan to have a plan”. Labour MP Tan Dhesi, who chairs the Commons defence committee, said key decisions had been delayed until the spending review. Former Nato secretary general Lord Robertson called the Budget “pretty good news for defence generally” but warned of “battles ahead” over spending.

Healey said the government would also explore private-sector financing and work with Finland, Poland and the Netherlands on a proposed multilateral defence mechanism. He announced that the National Wealth Fund and British Business Bank would be directed to put £5bn into defence, dual-use technology and sovereign capability.

The BBC reported that Helen Miller, director of the Institute for Fiscal Studies, said investment in defence companies might contribute to the spending target, but it was unclear how much it would increase the UK’s defence capabilities.