Reeves grudgingly resorts to departmental salami slicing to fund UK defence budget

Keir Starmer looks on as defence secretary John Healey makes a speech. Healey resigned on Thursday. Photograph: Adrian Dennis/AFP Pool/AP View image in fullscreen Keir Starmer looks on as defence secretary John Healey makes a speech. Healey resigned on Thursday. Photograph: Adrian Dennis/AFP Pool/AP Analysis Reeves grudgingly resorts to departmental salami slicing to fund UK defence budget Heather Stewart Economics editor Starmer shows no will to pursue the main options for rising commitments: spending cuts, tax rises or borrowing UK politics live – latest updates Business live – latest updates When Keir Starmer wanted to promise Donald Trump that the UK would increase defence spending, he decided to fund it by slashing the UK’s aid budget – losing a cabinet minister , Anneliese Dodds, in the process. This time around, with John Healey’s Ministry of Defence (MoD) demanding an additional £18.5bn over four years to fund the defence investment plan , there was no such lever to hand. Instead, asked to find the money, the chancellor, Rachel Reeves , grudgingly resorted to classic Treasury salami slicing: asking Whitehall departments to pare about 1% off capital budgets they painstakingly negotiated less than a year ago. That sits uneasily with the government’s promises on the public services – repairing crumbling hospitals and overcrowded schools, for example – and the chancellor’s hopes of using investment in green energy to kickstart economic growth. In another well-worn manoeuvre, alongside demanding cuts elsewhere, Reeves also promised to use her department’s reserve to pay for £3.5bn worth of projects the MoD had expected to have to fund. When Healey saw the end result – a £13.5bn uplift over four years – he was horrified at what he saw as penny-pinching, and duly resigned . Polite but deadly: John Healey skewers Keir Starmer as he heads for the door | John Crace Read more Defending the cautious approach, Treasury insiders point to the MoD’s notorious profligacy and tend to shrug at some of the dire warnings from military chiefs, who have an inbuilt bias towards higher spending. And they reject the idea that the settlement Healey was being offered fell well short of what was needed, pointing out that £13.5bn over four years is £1bn a year or so less than the MoD had demanded – a modest sum to resign over. Yet Healey’s quiet fury came in the context of the wider argument about how the UK can fund rising defence commitments – including the promise Starmer has vocally made to spend 3% of GDP on defence by some point in the next parliament, and 3.5% by 2035. Here, there are essentially three options: spending cuts, tax rises or borrowing, and Starmer has shown no political will to pursue any of them. First, spending cuts: the question here is, which spending? The Treasury had already squeezed departments in the run-up to the spending review; welfare cuts were botched last year and had to be reversed after a backlash from Labour MPs. Other costly spen