Britain has finally grasped the nettle on defence, but tough choices lie ahead

The new PM must balance the security budget and other urgent spending priorities, with little room for manoeuvre

Keir Starmer’s defence investment plan leaves behind spending problems that his successor will not be able to avoid.

Military budgets will be well short of the UK’s Nato commitments by the end of the decade, and European allies and a combustible White House are likely to notice.

Yet finding further cash for the profligate Ministry of Defence will require squeezing other departments, because raising taxes would be fraught and the headroom for extra borrowing is limited.

Another option is to abandon Britain’s residual ambitions to be more than a regional power, though it is not one allies are keen for the UK to take.

The complication is that the investment plan is trying to tackle several major problems at once. The post cold war peace ended more than four years ago with Russia’s invasion of Ukraine and, as the plan document drily notes, “the world has changed”, with the threat from Moscow heightened and the Middle East volatile.

At the same time, Labour ministers are right to say their Conservative predecessors left behind a funding mess, while increasing commitments by extending support to Ukraine and signing up to develop nuclear-powered submarines with Australia and the US, and fighter jets with Japan and Italy.

Dan Jarvis, the new defence secretary, said on Tuesday 47 out of 49 major projects were delayed or over budget. As the defence investment plan makes clear, at its heart is a massive investment in nuclear, which accounts for 20% of the entire defence budget and is rising to 25% as modernisation continues.

A total of £47bn is being spent on nuclear submarines, principally Dreadnought boats to replace the Trident-carrying Vanguards, now so old that their crews have to endure record-breaking patrols of six months plus.

Yet, as the public accounts committee complained in June , the nuclear programme has been subject to limited scrutiny by parliament because it is considered too sensitive.

The mystery, though, is why it took Labour so long to grip defence costs. The reckoning came after the publication of a lightweight review last year and a full three-year spending review.

It was only towards the end of last year that it emerged the MoD’s sprawling ambition was £28bn underfunded – prompting months of bitter ministerial wrangling.

Meanwhile, Donald Trump arrived at the White House with fluctuating enthusiasm for Nato and a firm belief that European allies had been free-riding on US defence expenditure.

Starmer tried once to placate Trump by agreeing to slash overseas aid to increase defence spending to 2.5% of GDP by 2027, a limited rise that for a moment maintained UK leadership in Nato.

The problem was that Trump wanted to go much further, to 3.5% by 2035, and Nato allies, desperate to keep the US president on board, fell into line at the Nato summit last summer.

So did Starmer, though the easy spending decisions had already been made. Amid a lack of headroom in the UK’s public finances, ministers fell out, leaving the final settlement at 2.7% of GDP by 2030, well short of the Nato target.

Government sources said Rachel Reeves, the chancellor, found it frustrating to deal with John Healey, the former defence secretary, because of his refusal to negotiate directly with her, choosing instead to talk to Starmer.

Healey resigned in June because he was not happy with the money Starmer had offered, and Jarvis was only able, in less than three weeks, to obtain £1.5bn more. The final budget gap was £3bn.

Allies of Healey, meanwhile, say he remained in touch with Treasury officials and ministers when working out the size of the MoD black hole, but after that negotiations had to be decided by Starmer.

They accused the chancellor of refusing to engage with the prime minister, leaving Starmer having to go round individual cabinet secretaries to get them to agree to budget reductions.

The plus, from a security perspective, is that the plan represents the first time for a generation that Britain is investing in its defence capability, at a moment of genuine international need.

There will be £5bn more for drones by 2030, badly needed by the British army to deter a Russian invasion of Estonia. At present UK forces would run out of drones in a couple of days to defend a Nato ally.

But the question is whether the sums on offer are in line with Britain’s ambition to be a reliable international partner. The UK is poised to assist in peacekeeping in the strait of Hormuz alongside France and others, with HMS Dragon, a destroyer, Typhoon jets, mine clearance robots and drones, if Trump can strike a peace agreement with Iran.

Now there is a risk that the UK will fall short of hitting Nato targets, policed vigorously by Trump’s White House. Trump’s term ends in 2029, but a Republican may succeed him, and the scale of the US’s long-term commitment to defending Europe is uncertain. If it has been painful to lift defence spending to 2.7% of GDP, Andy Burnham may find it harder to go to 3%, never mind 3.5%.

Another option is to back out, though it is not what others are doing. Germany, with financial headroom to borrow, wants to hit the 3.5% target as soon as 2029.

Its military expenditure is intended to be €150bn (£130bn) that year, compared with the UK’s planned £79.1bn, agreed on Tuesday. But Berlin, too, wants the UK to play its part in international missions such as Hormuz and supporting Ukraine.