John Healey's Challenge: Funding UK Defence as Chancellor After Criticizing Treasury

John Healey as chancellor will now have to deliver on what John Healey as the former defence secretary said the Treasury failed to do - properly fund Britian's armed forces.

When he resigned from Sir Keir Starmer's government last month he accused the Treasury of being "unwilling" to properly fund the Defence Investment Plan (DIP).

This was supposed to set out details of defence spending to modernise the military and reverse what he had called "the hollowing out" of the armed forces.

The DIP's publication had been delayed by nearly a year as Healey wrestled with the Treasury and No 10 to fund the plans. He didn't get anywhere near what he said was needed.

When Healey resigned last month, he had been offered only an extra £13.5bn - what amounted to a 0.08% increase in the defence budget.

At the time he made clear that was not enough to keep the country safe and to meet rising threats.

Those close to him said in reality the offer amounted only to an extra £10bn, with the rest what they called "Treasury Trickery".

Healey's resignation letter also expressed his frustration that the government had no clear timetable to meet its promise of increasing the UK's defence spending to 3% of GDP.

He wanted to reach that target by 2030, the year when many in Nato have said the alliance must be ready for conflict.

But under Sir Keir, the 3% pledge remained vague - some time in the next parliament. A further Nato pledge to increase defence spending to 3.5% of GDP by 2035 appeared to be even more remote.

Now as Andy Burnham's chancellor, Healey will be under pressure to put his money where his mouth is.

But as chancellor he can't just focus on defence. There will be many competing demands.

And the extra spending he argued for as defence secretary is significant. According to calculations by the Office for Budget Responsibility (OBR), reaching this 3% threshold will demand an additional £17.3bn per year by 2029–30. The overall defence budget would have to rise from more than £63bn a year to closer to £90bn by 2030.

Any increase in defence spending will increase the pressure for tax rises, though Healey has argued in the past for "creative funding options". That might suggest he has thought of other ways to fund the Ministry of Defence.

The Liberal Democrats have argued for defence bonds - though Sir Keir argued that was just another way of borrowing money.

But without extra funding, Healey has been clear Britain's armed forces will not be ready to meet rising threats. A revised DIP published following his resignation still had a £5bn black hole.

Key plans to transform the military with drones, and uncrewed warships and aircraft are still not fully funded. Defence chiefs have been emphasising the importance of learning the lessons from the war in Ukraine. But plans for new air defence systems and long-range weapons remain underfunded.

Now he's the chancellor, Healey will have the opportunity to set out a plan to increase defence spending to 3% of GDP himself.

If he is true to his word, it can only mean positive news for his successor as defence secretary.