The Treasury has yet to conduct any analysis of the trade-offs necessary for the UK to meet its NATO defence spending pledge of 3.5% of GDP, Chief Secretary Lucy Rigby told MPs during a joint session of the Treasury and defence select committees on Wednesday. Under robust questioning, Rigby repeatedly stated that funding additional defence spending would be a matter for "the next prime minister."
Treasury Confirms No Number-Crunching on Defence Target
When asked if the Treasury had performed any analysis on the trade-offs required to hit the 3.5% target, Rigby initially deferred to a Treasury official appearing alongside her. Pressed again, she responded, "No, is the short answer." Treasury Select Committee Chair Meg Hillier reminded Rigby that, as chief secretary, she oversees all public spending. The failure to outline a future spending path was among the reasons for Defence Secretary John Healey's recent resignation.
Scale of Funding Gap Highlighted
Committee member Bobby Dean highlighted the magnitude of the required shift, noting that the extra spending would amount to £30-40bn, equivalent to 3p to 4p on all income tax rates. Rigby acknowledged that such a change would necessitate a debate about "public consent." The government has an interim target of spending 3% of GDP on defence in the next parliament, but the path to that goal has not been set out. Rigby said this would be determined in the next spending review, expected in mid-2027, by which time Andy Burnham is projected to be prime minister.
Defence Spending as Number One Priority
Rigby stressed that Prime Minister Keir Starmer has stated defence will be the top priority in the next spending review. However, she repeatedly noted the difficult decisions ahead, saying, "It's not straightforward: money is finite." Healey resigned ahead of the publication of the Defence Investment Plan, which allocated an additional £15bn for the department over four years, raising spending to 2.7% of GDP. Whitehall departments have been asked to cut investment plans to fund this shift, but Rigby conceded that an extra £4.7bn must be found in the autumn budget, by which time Rachel Reeves is expected to have been replaced.
Comparison to 'Black Hole' in Public Finances
Rigby described the approach of announcing projects and funding them later 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. Hillier noted that projects had been promised without full funding, which was described as a "shocking £22bn black hole" left by the previous government.
Strained Treasury-MoD Relations
Rigby and Defence Minister Luke Pollard were repeatedly asked about the fractious relationship between the Treasury and the Ministry of Defence. Both claimed the two 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."
