Rachel Reeves has put forward a defence spending increase of less than £10billion over the next four years — a figure defence chiefs fear falls far short of what is needed as Britain faces mounting security threats.
The Chancellor has outlined what sources describe as a "limited" increase with the Prime Minister, amid concern over the Iran war's impact on the public finances.
The armed forces are already warning of a £28billion funding gap over the next four years. Defence chiefs are meeting this week to discuss cuts running to several billion pounds for the current financial year alone — reported to be in the region of £3.5billion.
A government source reportedly said the Chancellor proposed the sub-£10billion figure during talks with Sir Keir Starmer, with a larger commitment deemed unaffordable. She is allegedly unwilling to break her fiscal rules or raise taxes to fund a bigger increase.
The Iran war has pushed up government borrowing costs, while households face higher energy bills, dearer petrol and rising shop prices. Reeves is drawing up plans for a targeted energy bill bailout for low-income households this winter and is expected to abandon a planned 5p-a-litre fuel duty rise from September — a move costing around £2.6billion — adding further strain to the public finances.
Defence Secretary John Healey is pressing for a larger settlement, with concerns growing that £10billion will prove insufficient given the increasing likelihood that British forces could be deployed to Ukraine and the Middle East, reports The Times.
The internal rows have delayed publication of the defence investment plan — intended to set out a decade-long funding blueprint — by more than six months.
Starmer has yet to settle on a figure. "What I am not going to do is put out a plan when I cannot explain exactly how it will be funded," he told MPs this month.
"We are finalising that, we are nearly there. It is my job to resolve it and resolve it I will."
Any announcement is expected after the May 7 local elections.
The Prime Minister faces mounting pressure after Lord Robertson, the former Nato secretary-general who served as defence secretary under Sir Tony Blair, accused him of showing a "corrosive complacency" towards military spending.
Robertson charged that there was a gap between Starmer's rhetoric and action on defence, and that he was "not willing to make the necessary investment". In a speech on Tuesday evening he accused "non-military experts" in the Treasury of "vandalism" — a direct attack on Reeves.
Invoking President Trump's criticism of Nato, he said: "Recent days have shown that the role and priorities of the United States have shifted and will never be the same again. We are underprepared. We are underinsured. We are under attack. We are not safe … Britain's national security and safety is in peril.
"We are simply not ready and we need to rebuild war readiness in order to deter any adversary."
