The next UK chancellor will have to find almost £5bn over four years to fund the remaining gap in the Ministry of Defence's Dip programme, according to government figures published alongside a joint Treasury-MoD document. This includes nearly £2bn from government spending for 2026-27.
Departments ordered to cut capital spending by 1%
As Prime Minister Keir Starmer explained in his speech this morning, all government departments have been asked to cut capital spending by 1%, generating £4bn over four years. Two departments face larger reductions: transport must cut an additional £800m over four years, and energy must cut an extra £2bn over four years.
Energy and transport cuts detailed
The document, jointly produced with the Treasury, states: “DESNZ [Department for Energy Security and Net Zero] will find an additional £2bn of savings – including £400m financial transactions – while maintaining the fastest growing capital budget out of any department across this spending review period. Getting off fossil fuels is vital to our national security, safeguarding household, business and government finances. DESNZ will reshape its capital budget in a way which continues to protect the clean power mission, drive renewable and nuclear build-out and insulate us from future gas price spikes on the path to energy independence. More detailed plans will be shared by autumn.”
On transport cuts, the document says: “DfT [Department for Transport] will provide savings of up to £700m from its roads funding. The department will consult on reductions to the third Road Investment Strategy (RIS3) – including the potential cancellation of the A38 Derby Junctions and A46 Newark bypass schemes, both of which are yet to enter contract and not as far along as other road schemes. There will be stakeholder consultations before any final decision is taken. DfT will also explore limited reductions to as yet uncommitted roads funding. The government remains committed to protecting funding for local authorities to mend potholes and repair their roads, protecting investment in rail infrastructure, including Northern Powerhouse Rail, and the proposals will not impact bus or rail services.”
Political context: Reeves' departure anticipated
The document notes that the next chancellor will have to handle the remaining Dip funding shortfall. This comes as Chancellor Rachel Reeves is widely expected to leave her post when Andy Burnham becomes Prime Minister. Her joint appearance with Starmer this morning had a valedictory feel, with Starmer speaking as if at her leaving event.
The Ministry of Defence also published a separate document explaining how the £15bn Dip programme is being funded.
