Reeves blocking spending boost for defence

Rachel Reeves is resisting pressure from military chiefs to spend billions more on defence, The Telegraph understands.

The Chancellor has rejected requests from the Ministry of Defence to increase its budget amid fears of a £28bn funding shortfall.

Talks over the defence budget have now hit a roadblock, as Ms Reeves faces warnings from service chiefs that existing plans will not be enough to meet Britain’s spending commitments over the next four years.

Sir Keir Starmer has set a target of spending 2.5 per cent of GDP on defence by April 2027, with an “ambition” to increase this again to 3 per cent after the next election.

It was reported this week that Downing Street wanted to speed up this increase to hit 3 per cent by 2029. However, sources later insisted this was misinterpreted. It is thought the Treasury was concerned about any suggestion of going faster.

Downing Street has never explained how the planned uplift will be funded, and the MoD argues that it is facing a hole of tens of billions of pounds after inflation and overspending on procurement.

Defence officials have repeatedly warned about the possibility of a conflict with Russia in coming years, saying that rapid rearmament is crucial.

Air Chief Marshal Sir Richard Knighton, chief of the defence staff, said last week that Russia’s military stance had “shifted decisively westward” and added that “hard choices” were needed on spending.

Officials have requested that Ms Reeves reopen discussions about the funding the MoD received in last June’s spending review, but her team is insisting that no extra money is available.

Sir Richard is understood to have told the Prime Minister about the possible £28bn shortfall in a Downing Street meeting before Christmas.

The discussions have delayed the release of the Defence Investment Plan (DIP), which will spell out how Britain will equip its military over the next decade.

Government sources told The Telegraph that the Treasury was worried about wasteful spending by the MoD, and was refusing to increase its budget beyond the settlement of £73.5bn a year by 2028-2029.

Treasury officials are also concerned that giving more money to defence will force them into spending cuts elsewhere, or else leave Ms Reeves with no choice but another tax raid in her Budget.

On Tuesday, Air Chief Marshal Sir Harv Smyth, the head of the RAF, said voters had become “frustrated” by the sluggish pace of the DIP and blamed the “political level” for the delay.

“We’re working on it as hard as we can. It is dominating at the chiefs’ level and is definitely at the forefront of the Defence Secretary’s mind,” he said during an event at the Royal Aeronautical Society.

“All things being equal, we are going through as many iterations as we can to present as many options as we can to ministers to make decisions. In truth, it’s sitting at the political level.”

Sir Richard issued a joint call with his German counterpart last week for a “step change in our defence and security” and called for more spending as the “responsible action of nations determined to protect their people and preserve peace”.

In a newspaper article, the pair said that Nato’s plan for higher spending “reflects our new security reality and requires hard choices and prioritisation on public spending for all members”.

They added: “Russia’s military posture has shifted decisively westward... This is a reality we must prepare for; we cannot be complacent.

“Moscow’s military build-up, combined with its willingness to wage war on our continent, as painfully evidenced in Ukraine, represents an increased risk that demands our collective attention.”

It follows similar warnings from other senior defence figures. In December, Gen Sir Gwyn Jenkins, the First Sea Lord, said that Britain must “step up” spending or risk losing control of the seas to Russia.

On Saturday, Sir Keir told Nato allies at a security summit in Munich that he wanted to accelerate the rearmament of Europe, arguing: “To meet the wider threat, it’s clear that we are going to have to spend more, faster.”

But No 10 later denied reports that the Government was planning to increase defence spending to 3 per cent of GDP before the end of the current parliament, and pointed to plans for more collaboration on defence procurement with European allies.

A source said that bringing forward the uplift would have “significant fiscal implications” and that the Government was instead working on saving money from the MoD’s existing “envelope” and working with other Nato countries to buy arms more efficiently.

On Monday, Mark Carney, the Canadian prime minister, urged Sir Keir to join a new “defence, security and resilience bank” which would provide loans to Western countries for military procurement.

The UK has previously ruled out joining such a bank, but sources said Mr Carney’s intervention had brought the scheme back on the table.

A Treasury spokesman said: “The Chancellor has been clear about her unwavering commitment to national security. That’s why she funded the biggest uplift in defence spending since the Cold War, backing our Armed Forces with better kit and supporting good jobs all over the UK.”

A government spokesman said: “The Government is focussed on delivering for defence.

“As demands for defence increase, we are delivering the largest sustained increase in defence spending since the Cold War, with an extra £5bn for defence this year alone.”

[Source: Daily Telegraph]