UK Chancellor Healey to Delay Defence Spending Target Until 2027 Review

Britain will lead from the front on defence spending and do whatever it takes to keep the country safe, Health Secretary Wes Streeting said ahead of Chancellor John Healey's first Budget. Healey resigned as defence secretary in June after criticising Prime Minister Keir Starmer and former Chancellor Rachel Reeves over the Treasury's refusal to commit to three per cent of GDP on defence by 2030. The UK currently spends around 2.7 per cent of GDP on defence.

Healey is expected to borrow billions to boost defence spending on Wednesday, but economists predict the Budget will omit clear plans to reach the three per cent target. Instead, major financial decisions on defence and welfare are likely to be delayed until a Spending Review in 2027. Raising defence spending from current levels to three per cent of GDP would cost approximately 11 billion pounds more each year.

City economists warned that kicking tough decisions into the long grass could push up government borrowing costs as bond traders worry about the sustainability of public finances. Pantheon Macroeconomics said avoiding known spending pressures now undercuts the credibility of planned fiscal consolidation. They also warned the Budget will fail to account for tens of billions of already committed spending, including public sector pay increases and defence funding.

Peel Hunt economist Kallum Pickering said the government had made no serious commitment to fix the UK's distortive tax code or the perverse incentives caused by a bloated welfare system. He added that the government suffers from a credibility discount given Labour's struggles to rein in spending in the short term. Streeting said the UK is Nato's third biggest defence spender and is determined to lead from the front.

Streeting said the UK is working with European partners through the E5 group of Germany, Poland, France, Italy and the UK to strengthen defences and deliver on Nato commitments. He said Healey has a strong record of backing the Armed Forces. Even if the three per cent target is delayed, Healey and Defence Secretary John Healey are set to send a clear message to Nato allies including Donald Trump that the UK is fully committed to funding the military and national security.