To fund the investment in national security we need, Burnham should steal our defence bonds policy
HMS Prince of Wales departs Portsmouth en route to join in NATO exercises in 2024 (Mark Dillen/Alamy)
3 min read
The government has finally released its long-awaited Defence Investment Plan (DIP), after 14 months of delay. It was, as expected, too little and too late.
With Vladimir Putin waging war in Europe and an unreliable Donald Trump in the White House eroding the essential alliances that underpin our security, we must be upfront with the public about the threats facing Britain. The Prime Minister himself has warned that Russia could launch an attack against Nato by 2030. In light of these unprecedented threats, we urgently need to invest in our national security. We need to give confidence to our Nato allies and international partners that we are serious about our collective defence and national resilience.
The resignation of the former defence secretary John Healey – in frustration at the settlement on offer from the Treasury – shone a harsh spotlight on the government’s struggle to fund our armed forces, following years of cuts by the Conservatives.
Despite Dan Jarvis, his replacement as Defence Secretary, winning an additional £1.5bn from the Treasury, there is still an enormous funding gap that needs to be filled by the prime minister in waiting, Andy Burnham. Of the £15bn uplift secured in the DIP – itself only just over half of the £28bn black hole outlined by military chiefs – £4.7bn is currently entirely unfunded.
As a country, we need to be moving at pace urgently to inject finance into our national security, not dragging our feet. The Liberal Democrats have a clear plan to do this: by issuing ‘defence bonds’ to generate an additional £20bn over two years, hypothecated to spending on capital investment in our military. It’s an idea that Burnham is reportedly considering – and which I would encourage him to implement as a priority once over the threshold of No 10.
Our vision for defence bonds would see them back British industry, create jobs and foster innovation. They would also allow the public to have a genuine stake in our collective national security. This investment would supercharge our defence industry, all while sticking to the government’s fiscal rules, to which Burnham has committed. It would also allow us to support research and development to further stimulate our economy and generate growth.
There is strong evidence to support the value of defence bonds. Take ‘green gilts’, issued to raise money for capital investment with an environmental benefit in 2021. The very first sale raised £10bn.
The DIP has shown that the current government does not have a credible plan to fund defence
We need to be this ambitious for our defence industry. Critically, we see defence bonds as part of a funding mix for defence. That mix would also include working with our international allies to generate innovative collective financing models – including Liberal Democrat calls for a European Rearmament Bank – and negotiating access to the EU’s €150bn Security Action for Europe (Safe) programme.
We would also scrap the government’s self-defeating and anti-growth red lines on Europe – and open negotiations to join the EU’s single market to stimulate the growth we desperately need. Growing the economy is how we can generate the funding necessary for our defence needs.
The DIP has shown that the current government does not have a credible plan to fund defence. That sends all the wrong signals to industry – and to our allies and adversaries alike.
When Healey resigned, he said Keir Starmer was “unable” and the Treasury was “unwilling” to keep our country safe. This is unacceptable.
The Conservatives hollowed out our armed forces and Starmer failed to fund them. Burnham must now ensure any government’s first priority: to keep our country safe. Issuing defence bonds is an obvious first step towards funding our armed forces properly.
James MacCleary is Liberal Democrat MP for Lewes and defence spokesperson
