Defence black hole triples to £15bn

The defence spending black hole facing Andy Burnham has tripled to £15bn, after Downing Street admitted it had not yet identified the cuts needed to fund its plans.

On Tuesday, Sir Keir Starmer pledged an additional £15bn to boost defence spending over four years, in a long-awaited announcement.

It later emerged that £4.7bn would not be confirmed until the Budget, expected in October, leaving Mr Burnham, Sir Keir’s presumed successor, with the challenge of coming up with the funds.

But on Wednesday, No 10 could not explain where the other £10.3bn, which is supposed to be made up by departmental savings, would come from.

It means Mr Burnham will have to decide where the axe will fall and announce a series of unpopular spending reductions, just months after he takes over as prime minister.

James Cartlidge, the shadow defence secretary, said Labour’s defence investment plan (DIP) had “completely unravelled barely a day after it was published”.

“The increase in spending is far too little, the capability promised comes far too late, and now we learn that they don’t even know how to fund it.”

He added: “Keir Starmer is kicking the can down the road for his successor because he has failed to take the tough decisions needed to keep the country safe.”

Rachel Reeves, the Chancellor, said that government departments had agreed to save £10.3bn between them to pay for the DIP.

However, the Prime Minister’s spokesman said on Wednesday that details of the actual cuts would not be announced until the autumn, by which time Mr Burnham would be in No 10.

Instead of a raft of spending cuts, the Government could raise tax revenue by lifting the ban on oil and gas drilling in the North Sea.

However, that is likely to be opposed by Ed Miliband, the front-runner to succeed Ms Reeves as chancellor.

The DIP, unveiled on Tuesday after a year-long delay, pledged to increase spending on the Armed Forces by £15bn.

Each government department was asked to find 1 per cent savings in their budgets to fund the plans, with the Department for Transport and the Department for Energy Security and Net Zero asked to make further cuts owing to their larger budgets.

However, on Wednesday, the Prime Minister’s spokesman said decisions had not been made on which projects could face the axe, apart from a small number of road projects.

He said: “More detailed plans will be shared by autumn.

“But as set out yesterday, the Department for Transport will provide savings of up to £700m from its roads funding.

“They will consult on reductions to the third road investment strategy, including the potential cancellation of the A38 Derby Junctions and A46 Newark Bypass schemes, both of which are yet to enter contract and not as far along as other road schemes.”

The spokesman did not rule out cuts to some hospital building programmes.

He would only say that the cuts would not affect hospitals with unsafe concrete or the first wave of the Government’s new hospitals programme.

He added: “We’ve worked with secretaries of state across government to find savings and reallocations in a way that protects day-to-day spending on front-line services.”

A document published by the Treasury on Tuesday asserted that the defence plans will be funded by “finding efficiencies, cancelling or delaying lower-priority programmes and remaining ruthlessly focussed on value for money for the taxpayer”.

“Departments will also monetise assets, including underused land and buildings, so that we are securing the maximum value from the £1.9 trillion of assets the Government holds,” it said. “Departments will bring forward details in due course.”

Later, Sir Keir suggested at Prime Minister’s Questions that Mr Burnham could use a buffer of up to £22bn created by Labour’s last Budget to make up the shortfall in his defence plan.

He said: “The very reason for the headroom is to have the credibility to take decisions outside the Budget and outside the spending review. That’s why you have headroom to take credible decisions like this.”

Sources close to Mr Burnham said he had been briefed on the DIP before it was published, but was not told he would have to find more money to fund it fully.

The head of the Armed Forces heaped pressure on Mr Burnham to meet the Nato requirement for 3.5 per cent of GDP defence spending. Sir Keir’s spending uplift will equate to just 2.69 per cent of GDP on defence by 2030.

Air Chief Marshal Sir Richard Knighton, the chief of the defence staff, told The Times: “To deliver the strategic defence review and our Nato requirements, we need to spend 3.5 per cent of GDP.

“The Prime Minister, alongside other leaders, committed at the Hague at Nato last year to do that.”

Writing for The Telegraph, Ms Reeves warned against borrowing to fund defence, saying that doing so would put Britain’s national security at risk.

The Chancellor’s remarks will be interpreted as a warning to Mr Burnham.

“The funding for this is only possible because of the changes to the fiscal rules that I made two years ago,” she said.

“The same fiscal rules that have allowed us to fund Ukraine’s war effort while securing £15bn for the defence investment plan.

“By preserving economic resilience, keeping borrowing costs down, and supporting growth, they enable us to spend what is needed to secure Britain.”

She said taking on further debt would make the country vulnerable to price instability caused by global conflict.

“A Britain spending beyond its means is a weak Britain – one that is more vulnerable to global shocks like the ones caused by Russia’s invasion of Ukraine and more recently the war in Iran,” she said

“That weakness would be something that our adversaries could exploit, to the detriment of our national security, right down to the pounds in people’s pockets. I will never let that happen.”

On Wednesday morning, Luke Pollard, a defence minister, said the next chancellor would have to “find the resources” to pay for the defence plan.

“This is pretty standard fare for the Government to make an announcement and set out the details at the forthcoming Budget,” he told the BBC.