Just weeks after quitting as defence secretary over a funding row, John Healey has been handed the keys to 11 Downing Street as Chancellor of the Exchequer — a surprise move that puts a military-spending hawk in charge of the entire UK budget. The appointment, which blindsided Westminster, is the clearest signal yet that Andy Burnham’s new government will be defined by a tense balancing act: how to meet rising global threats while keeping a fragile economy on track.
Healey, a 66-year-old Labour veteran and MP for Rawmarsh and Conisbrough, is seen as a safe pair of hands. He served in the Treasury under Tony Blair and Gordon Brown, and has been on Labour’s frontbench almost continuously since 2001. But his return to government comes after a dramatic resignation that exposed deep divisions inside the previous Starmer administration over how much the UK should spend on defence.
“John Healey becomes Chancellor weeks after quitting as defence secretary over funding; explains defence spending pressures and UK economic outlook.”
As defence secretary, Healey had pushed hard for the publication of a Defence Investment Plan (DIP) — a blueprint to modernise the armed forces and reverse what he called "the hollowing out" of the military. He wanted the UK to hit a Nato target of spending 3% of GDP on defence by 2030. But after months of wrangling, the Treasury offered only an extra £13.5bn, which Healey dismissed as a 0.08% increase — and which sources close to him said was actually closer to £10bn once “Treasury trickery” was stripped out. He resigned, accusing the Treasury of being “unwilling” to properly fund the nation’s defence.
Now Healey is the man in charge of the purse strings. As Chancellor, he will have to balance competing demands — not just from the Ministry of Defence, but from health, education, housing and the cost-of-living crisis. The Office for Budget Responsibility (OBR) has calculated that reaching the 3% defence target by 2029-30 would require an additional £17.3bn per year, taking the defence budget from £63bn to nearly £90bn. Any such increase would raise pressure for tax rises, though Healey has previously argued for “creative funding options” (a possible reference to ideas like defence bonds, which the Liberal Democrats have proposed but which Starmer dismissed as just another form of borrowing).
For UK readers, the Healey appointment matters on two fronts. First, it signals that defence spending is likely to be a major battleground in the coming months: the new Chancellor made his name by quitting over the issue, and will be under pressure to deliver the funds he said were necessary. Second, it offers a glimpse into Burnham’s economic priorities. Burnham has promised a “very prudent” approach to the economy, but also said he would look at “any flexibility” in fiscal rules to borrow more for infrastructure. Healey, who shares Burnham’s focus on reindustrialisation and the cost of living, is seen as someone who won’t spook the markets but can drive through radical reforms.
Q: Why did John Healey resign as defence secretary? Healey quit because the Treasury, then run by Rachel Reeves, offered only an extra £13.5bn for defence — what he called a 0.08% increase that was “well short of what is required for defence and the country at this dangerous time.” He wanted a clear timetable to reach 3% of GDP by 2030, but the government kept the target vague.
Q: What is the 3% defence spending target? It’s a Nato benchmark that many allies have said must be met by 2030, when the alliance needs to be ready for potential conflict. The UK currently spends about 2.3% of GDP on defence. Reaching 3% would mean an extra £17.3bn per year by 2029-30, according to the OBR.
Q: How will Healey fund higher defence spending? He hasn’t said yet. As Chancellor, he will have to decide between tax rises, borrowing, or “creative funding options” (such as defence bonds). He has argued that without extra money, Britain’s armed forces won’t be ready to meet rising threats.
What happens next is uncertain. Burnham has promised new cost-of-living measures on Tuesday, including cuts to energy bills and bus fares. He has also pledged to end rough sleeping as his first policy commitment, backed by an extra £340m. But the biggest test for Healey will be the autumn Budget, where he must set out a spending plan that satisfies both his old demands for defence and the new government’s wider promises — all without spooking the markets or breaking Labour’s fiscal rules.