Healey to announce borrowing-funded defence investment in Budget as Tories demand 3% pledge

Right · 2Chancellor John Healey is set to announce billions of pounds in new defence investment in Wednesday's Budget, according to reports in The Times and Sunday Times relayed by GB News and City A.M. 1 2 Right · 2The money is expected to go through the National Wealth Fund and the British Business Bank, which would back British defence manufacturers and military technology firms, with drone and AI companies among those expected to benefit. 1 2 Right · 2It would be financed by long-term borrowing rather than spending cuts. The reports say this would not breach the fiscal rules, because borrowing by public financial institutions ("PuFins") that is expected to generate a return is treated differently from conventional spending. 1 3

Right · 2City A.M. reports that the Treasury is reportedly preparing £20.4bn in additional support for the two bodies from 2028-29, though the amount going to defence is unconfirmed. The package would count towards Nato's defence spending target and, according to The Times, serve as a "down payment" on Healey's three per cent ambition. 2 1 Right · 2Healey resigned as defence secretary under Sir Keir Starmer about four months ago, after a row over funding, having demanded a timetable to raise defence spending to 3% of GDP by 2030, ahead of Nato's 3.5% target by 2035. The UK currently spends around 2.6% of GDP on core defence, and Healey has said a full timetable will come at next year's spending review. 2 1 3 Right · 1The Office for Budget Responsibility has estimated that reaching 3% of GDP would need an extra £17.3bn in 2029-30. 2

Right · 1Shadow chancellor Andrew Griffith said Healey "must have fully funded 3 per cent defence spending, or resign" by the end of his Budget statement, accusing him of "dithering". GB News notes the Conservatives have said they would fund defence by cutting benefits. 1 Right · 2Shadow defence secretary James Cartlidge welcomed the plan but said Labour was copying a Conservative proposal for a sovereign defence fund, and warned that new technology investment would not remove the need for money for training, equipment and ammunition. 1 2 Right · 1Defence Secretary Wes Streeting rejected the criticism, saying Kemi Badenoch's Conservatives had shrunk the army to its smallest size since the Napoleonic era and left a £17bn hole in the equipment plan. He has also warned that Britain has "a little over 1,000 days" to be ready for possible conflict. 2

Right · 1On Monday defence shares rose on the reports: Rolls-Royce up nearly 2% to 1,184.40p, Babcock up 2.6% to 964p and BAE up 1.7% to 1,963p in early trading. An IG analyst said it was not the "1930s-style rearmament many say is needed" but a sign of more to come, while City A.M. said the borrowing could be a "lightning rod for criticism". 3 Left · 1A Guardian column describes the Budget as Andy Burnham's first as prime minister and Healey's address as "high-stakes"; it concerns the government's "red tape" rhetoric, not defence. 4