John Healey was privately pushing for the UK to join an international investment bank to raise more money for defence spending before he resigned as defence secretary on Wednesday, BBC News has been told. Allies of Healey claim the Treasury tried to shut down negotiations for the UK to join the Defence, Security and Resilience Bank (DSRB), an idea spearheaded by Canada.
The former defence secretary had been averaging fewer than five hours of sleep a night since the war in Iran began, waking in the middle of the night to take calls. On 2 March he rose at 3am after a drone strike on RAF Akrotiri to give the go-ahead for family members and non-essential personnel to be moved away from the British military base in Cyprus into hotels. “These are the most dangerous and uncertain times we’ve faced for decades,” he said in a phone conversation after updating the House of Commons. “Not since the end of the Second World War have we seen such heightened threats.”
“John Healey pushed for UK to join global defence bank but Treasury blocked it, allies say, as he resigns over defence funding shortfall.”
Healey’s resignation letter said there were “credible ways” to fund extra defence spending, including “working multi-nationally”. He believed joining the DSRB could have helped bridge a funding gap as well as supporting British businesses in the defence sector. The DSRB, which aims to help member countries fund defence projects at low costs, is expected to be officially launched at a Nato summit next month. Membership for the UK and other G7 countries would come with an upfront investment cost of around £870m spread over three years.
Canadian prime minister Mark Carney, who has been pushing the idea on the global stage, is said to be keen for the UK to join. Ministers have been mulling it for months but the chancellor is thought to have been unwilling to pay. Treasury sources claimed Healey never submitted an official request for funding related to the UK’s membership of the DSRB.
A government spokesperson said they were exploring setting up a “multilateral defence mechanism” with Finland, the Netherlands and others “to improve value for money” in defence procurement with allies. Sir Keir Starmer told the BBC on Friday he had made “hard-edged” choices on defence spending, including asking government departments to make cuts to help pay for it. Healey said Number 10 and the Treasury were prepared to give around £10bn in additional money in this plan, around £18bn less than what military chiefs have reportedly asked for.
In a previous interview before the Iran war broke out, Healey forcefully said: “There’ll be no repeat of the Iraq mistakes.” He set out principles that British action must be “defensive”, coordinated with allies and with a sound legal basis, which “allows our military to operate with the fullest confidence that what they do is legal and what they do is in the best British interests.”
A group of defence-focused Labour MPs have been lobbying ministers to look more closely at the DSRB for months. One advocate said it was likely that the up-front cost would have to be paid for by borrowing, but other supporters say the money should instead be viewed as an investment. Earlier this week Chancellor Rachel Reeves indicated she was not in favour of borrowing more to increase defence spending. Some MPs are pushing for membership of the DSRB to be funded through the National Wealth Fund, a Treasury-owned investment vehicle. MPs on Parliament’s Business and Trade Select Committee visited Canada last week to discuss the bank. Liam Byrne, the Labour MP who chairs the committee, has written about the visit.
Healey, 66, is increasingly talked of inside Westminster as a possible contender for the Labour leadership. His resignation came as the government’s Defence Investment Plan has yet to be announced.