The Treasury has not conducted any analysis of the trade-offs required for the UK to meet its Nato defence spending pledge of 3.5% of GDP, chief secretary Lucy Rigby admitted during a joint session of the Treasury and defence select committees on Wednesday. Under robust questioning, Rigby repeatedly stated that decisions on funding additional defence expenditure would be a matter for “the next prime minister”.
Treasury admits no due diligence on defence spending target
When asked if the Treasury had carried out any number-crunching on how to achieve the 3.5% target by 2035, Rigby replied, “these are decisions for the future government to make.” Treasury select committee chair Meg Hillier reminded her, “you are the chief secretary of Treasury. You’re the one in the government who oversees all the public spending.” Pressed on whether she had done an analysis of short- or long-term trade-offs, Rigby initially deferred to a Treasury official and then responded, “no, is the short answer.”
Committee member Bobby Dean highlighted the scale of the shift: “You’re talking about £30-40bn extra, equivalent to 3p to 4p on all rates of income tax.” Rigby acknowledged that such a change would require a debate about “public consent”.
Interim target and spending review left to future government
The government has set an interim target of spending 3% of GDP on defence in the next parliament, but the pathway to reach that level has not been outlined. Rigby said this would be addressed in the next spending review, expected in mid-2027, by which time Andy Burnham is anticipated to be prime minister. “We’ve said for the next parliament, we will get to 3%. And I understand that the question is being asked when in the next parliament. And I come back to the fact that the prime minister has said that defence will be the number one priority at the next spending review,” she stated.
Rigby stressed the difficulty of the decisions ahead, noting, “it’s not straightforward: money is finite.”
Healey’s resignation and the Defence Investment Plan
The failure to set out a future spending path was among the reasons for the recent resignation of defence secretary John Healey. Healey stepped down ahead of the publication of the contentious Defence Investment Plan, which allocated an additional £15bn to the department over four years, raising spending to 2.7% of GDP. Whitehall departments have been asked to cut investment plans to fund the shift, but Rigby conceded that an extra £4.7bn would need to be found in the autumn budget, by which time Rachel Reeves is expected to have been replaced.
Rigby defended the approach of announcing projects and funding them at subsequent fiscal events as “not uncommon”. However, Hillier compared this to the “black hole” in public finances that Reeves claimed to have identified when Labour came to power two years ago. “There were projects that had been promised that hadn’t been fully funded in the normal way, as you’ve just described, but that was described as a shocking £22bn black hole unfunded by the previous government,” she said.
Fractious Treasury-MoD relationship acknowledged
Rigby and minister for defence readiness and industry Luke Pollard were repeatedly asked about the strained relationship between the Treasury and the Ministry of Defence. Both claimed the departments were now working better together. Pollard, the MP for Plymouth Sutton and Devonport, joked, “I come from a naval family where, I was taught from an early age, the Royal Navy has two enemies, the French and the Treasury. We’re now good friends with the French … and I would say that the process between the Treasury and MoD, has been on a journey.”
