UK government seeks budget cuts to fund defence spending increase

Traders Union
All News
Financial News
UK defence funding debate

Highlights

Prime Minister Keir Starmer seeks roughly £15 billion in increased defence spending, mainly financed by 1% cuts to capital budgets across Whitehall by 2030.
The requested capital budget reductions, targeting around £6 billion with the largest cuts in energy and transport, face internal government disputes and delayed publication beyond the initial June 11 target.
The investment plan will allocate up to £6 billion for the Global Combat Air Programme and marks a generational boost to UK defence spending before the July 7-8 NATO summit.

Funding plan and timing pressure

As first reported by The Times, Prime Minister Keir Starmer is pressing ministers to accept cuts to capital spending as part of efforts to finance a roughly £15 billion boost for the armed forces under the Defence Investment Plan.

People familiar with the discussions say the government intends to cover the increase through lower spending across Whitehall rather than through higher taxes or extra borrowing. Starmer has asked departments to trim capital budgets, including infrastructure spending, by 1% to raise about £6 billion by 2030, with larger reductions likely to fall on the energy and transport departments.

One person briefed on the talks says capital spending is the main area of dispute inside government, with negotiations between Downing Street, the Treasury and ministers still continuing. Another official says the request for capital budget cuts arrived only in the past week.

A push to publish the plan as soon as next week, with June 11 seen as a possible target, has slipped and officials now say the announcement could come later this month. Defence secretary John Healey tells parliament last week that the plan will be published before the next NATO summit on July 7-8.

Pressure on investment strategy and defence priorities

The proposed reallocation is proving sensitive for Labour because Chancellor Rachel Reeves has made long-term infrastructure investment a central part of her economic strategy. In the autumn Budget in 2024, she announced an increase of more than £100 billion in capital spending and then added a further £13 billion in her Spring Statement last year.

Starmer is also pushing to secure the defence package as part of a wider set of policy decisions he wants completed before a potentially difficult summer. Other measures on that list include a social media ban for children under 16 and a reset in relations with the EU.

The investment settlement is expected to include up to £6 billion for the Global Combat Air Programme, the sixth-generation fighter jet project being developed by the UK with Italy and Japan. The Ministry of Defence says the government is delivering a generational increase in defence spending and is working to finalise a plan that will repair an outdated and underfunded programme.

We previously reported on growing scrutiny of the UK’s nuclear weapons spending as it takes up a larger share of the defence budget, with parliament raising concerns about weak transparency and missing asset records. That earlier piece also noted criticism over delays to the broader Defence Investment Plan and questioned the viability and rising costs of major programmes such as the Ajax armoured vehicle project.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.