Keir Starmer scrambles to resolve dispute over delayed UK defence budget

Sir Keir Starmer is scrambling to resolve the cross-Whitehall dispute over the UK’s defence budget, as part of a planned “reset” of his administration after the dire results Labour is expecting in Thursday’s elections.

The prime minister held talks with chancellor Rachel Reeves last week in a bid to finalise the 10-year defence investment plan (DIP), which has been repeatedly delayed to the dismay of both international allies and the defence industry.

One official briefed on the discussions said they were “nearing a conclusion”. Starmer and Reeves were expected to come up with “a fudge” to tackle a £28bn funding gap over the next four years identified by the Ministry of Defence, according to another person close to the talks.

Two funding proposals are being discussed in Whitehall to break the deadlock over the DIP — £12bn extra for the MoD over the next four years or £18bn extra over that timeframe, according to two people familiar with the matter.

The Treasury favours the first option, while the Cabinet Office is backing the latter, according to one of the people. Either option would still fall short of the funding gap identified by defence chiefs.

“It risks being classic Starmerism — not bold enough,” said one senior defence official, adding that “£12bn will mean cuts, £18bn means deferrals or delay” to crucial military programmes.

Ahead of the English council and devolved Scottish and Welsh elections this week, Starmer has campaigned heavily on his position on the world stage, including his role in forging future military coalitions for Ukraine and the Strait of Hormuz.

His final pitch to voters on Wednesday was that he was the right person to lead Britain at “this moment of great global instability”, unlike the leaders of Reform UK and the Green Party.

Some of Starmer’s allies are in favour of a significant package of extra defence spending, involving billions of pounds for the UK military, as a way to shore up his foundering administration.

As well as meeting Reeves to discuss the defence plan last week, Starmer also held another meeting in Downing Street with officials last Thursday, as efforts to resolve the impasse gathered pace.

At the weekend, the prime minister said in a Substack post that the government was “already delivering the biggest sustained investment in British defence since the cold war”. He added: “In the coming weeks, we will set out how we are going to go further and faster.”

The Institute for Fiscal Studies said after the autumn Budget that, under the current plans, defence spending would rise to 2.6 per cent of GDP in 2027-28, while Starmer has set an “ambition” of 3 per cent in the next parliament.

Reaching 3 per cent of GDP by 2030 would be equivalent to a boost of about £14bn a year, relative to staying at 2.6 per cent. Nato has set a 3.5 per cent of GDP target by 2035. Downing Street said the defence plan would be published “in due course”.

Number 10 is braced for heavy criticism of Starmer in the wake of the election results, although many Labour MPs do not believe it will crystallise into a serious bid to remove the prime minister.

Starmer will attempt to reassert his authority swiftly, including with a “policy blitz” that will encompass the King’s Speech on May 13, setting out Labour’s legislative plans for the next session of parliament.

Bills are expected to include plans for digital ID, reforms to special educational needs, asylum changes and a bill to promote the transition to low-carbon energy, alongside a wide-ranging financial services bill.

Starmer and Reeves will also promise much closer engagement with the EU and an unravelling of parts of the Brexit deal, ahead of a UK-EU summit in Brussels expected in early July.

Downing Street has downplayed expectations of a big ministerial reshuffle — Starmer is deemed too weak to carry out major surgery to his team — although speculation persists that he might carry out a limited change of personnel.

Additional reporting by Sam Fleming and Delphine Strauss