Former defence secretaries back Healey plan to use war bonds to boost defence spending

Two former Tory defense ministers have backed the use of defense bonds to raise funds needed to boost the UK’s military and security spending. Independent He understands that he is being considered by the new chancellor, John Healey.

A senior source who worked with Mr Healey to raise extra money for defense before he left Sir Keir Starmer’s government said the chancellor was considering an offer to join a new Canada-led global banking scheme that would allow him to find cheaper ways to finance defense projects.

Mr Healey resigned as defense secretary in June over a failure to meet defense spending requirements, claiming the package was £13bn short of the required amount, meaning the armed forces could not keep Britain safe. It was later revealed that a further £4.7bn of the £15bn plan was unfunded.

But with money to pay for the new government’s priorities in short supply and Mr Burnham saying Labor would stick to its manifesto commitment not to increase income tax, VAT or national insurance, Mr Healey arrived at the Treasury with few options for how to find an extra £18bn for defence.

Independent It is understood Mr Healey wanted to join Canadian prime minister Mark Carney’s Global Defense Bank to raise bonds but was blocked by then-chancellor Rachel Reeves, who was concerned it would breach strict borrowing rules.

He has now replaced Ms Reeves at No 11 and is believed to be trying to revive the bid.

The senior source said: “Mark Carney is not exactly a novice, he was governor of the Bank of England, which was always a good way to raise funds for defence.

“We argued and argued for defense bonds through the bank, but Reeves was completely deaf and didn’t even participate in the discussion.

“John Healey wants to pursue this idea, he wants to raise the money we need for defense because he knows better than anyone that this is not a luxury, it is absolutely necessary.”

They added: “The Canadians were also incredibly disappointed. They kept reaching out to Reeves to get us involved with the bank, but he wouldn’t listen.”

The proposal has the conditional support of two former defense ministers. Sir Gavin Williamson said Independent: “We need to look at all opportunities to see how we can get more money into defense and ensure our armed forces have the best. I hope Chancellor of the Exchequer John will be willing to explore this idea, as he was willing to do as defense secretary.”

Sir Malcolm Rifkind, the Tory defense secretary between 1992 and 1995, said it “seemed like a good idea”.

“In any case, we were told that HMG had excluded them,” he added. “Now that Healey, not Reeves, is Chancellor, nothing is absolute.”

Currently, nine countries (Canada, Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine) have registered with the bank.

Accordingly i PaperThe three-year cost of membership to the UK would be around £870 million, but it provides the option of pooling member countries’ resources to fund defense companies, allowing members to indirectly fund military spending.

The plan for Britain to follow comes after Mr Burnham vowed to stick to Ms Reeves’ financial rules on borrowing but said he planned to use the flexibility of those rules to the maximum.

There are concerns in the markets that Britain could become too heavily indebted under a more left-wing government.

At the time, Ms Reeves rejected the idea of ​​a defense bond because she warned it was “just another form of borrowing” under a different name, after the proposal was publicly defended by the Liberal Democrats.

The proposal was met with skepticism by some leading economists.

But Stephen Millard, deputy director for macroeconomics at NIESR, warned: “I suspect the UK will be a net contributor to the bank and therefore not make much of a profit. I would also be surprised if the bank could lend to the UK government at a lower rate than what we’re already seeing in gilts. So I think this is more of a scheme to help smaller countries get cheaper finance for defence, rather than big countries like the UK.”

Meanwhile, new defense secretary Wes Streeting said he wanted to make sure “every penny is spent wisely”, adding that investment in the armed forces must come with “modernisation”.

Mr Streeting insisted he wanted to follow the same “mantra” he had when he was health secretary, arguing it showed he was “maximizing value for money and reducing waste” after providing billions of pounds of extra funding for the NHS.

Speaking at the Farnborough International Airshow, Mr Streeting said his aim was to make the UK a “strong, reliable ally” while also supporting jobs at home.

The last government under Sir Keir increased defense spending by £15bn but there were still concerns they would not meet the target of 3 per cent of GDP by 2030.