Andy Burnham, the prime minister-in-waiting, has been told to borrow billions to fill a £4.7bn gap in defence spending – a move economists say could eat up more than a third of his fiscal headroom. The warning came as the head of the armed forces added to the pressure, saying the services need an extra £25bn a year for nine years.
Keir Starmer suggested on Wednesday that his successor – almost certainly the Makerfield MP – should use the government’s fiscal headroom to fund the shortfall in the Defence Investment Plan (DIP). The prime minister told MPs at PMQs: “It’s about £1bn a year over four years. Because of the decisions at the last budget, we’ve got headroom of £22bn. That is precisely so we can take decisions like this.”
“Andy Burnham faces £4.7bn defence funding gap as Starmer urges borrowing and military chief demands £25bn more.”
The DIP, unveiled on Tuesday, promises an extra £15bn over four years for weapons systems such as nuclear missiles and drones, but the Treasury has not allocated all the money. Official figures show around £1.2bn a year – or £4.7bn cumulatively – still needs to be found. The next budget, due in the autumn, will have to cover that gap through spending cuts, tax rises or borrowing.
Burnham’s team said he considers the plan settled and will not seek to renegotiate it, despite concerns over how it will be funded. It emerged he was not told about the £4.7bn gap when briefed by Starmer’s officials in recent days.
Ruth Curtice, chief executive of the Resolution Foundation, said: “The Dip will reduce headroom by around £2bn. On top of the impacts of the Iran war the new prime minister likely already starts with more than a third of their headroom eroded.”
The pressure intensified when Air Chief Marshal Sir Richard Knighton, head of the Defence Staff, said the services require an additional £25bn on top of scheduled spending for each of the next nine years – a far larger sum than the DIP provides.
Government officials are now scrambling to find savings, including £2bn of cuts to the energy department. The Treasury has said that around £1.2bn a year of the defence rise still has to be outlined in the Budget, leaving Burnham with a difficult choice: borrow more, cut deeper, or raise taxes – all while the military warns the current plan is not enough.