Britain’s Budget uses £3 billion in departmental capital cuts and £1.7 billion from a Treasury reserve to fill a £4.7 billion defense funding gap, leaving further choices for next year’s spending review.
The funding completes the allocation of the £15 billion Defence Investment Plan covering 2026-27 to 2029-30. HM Treasury said the 1% reduction in departmental capital budgets will apply from 2027-28 through 2029-30 and raise £3 billion. A further £1.7 billion will come from the Treasury’s capital reserve. The Budget says £10.3 billion had already been identified through reprioritizing public spending, leaving £4.7 billion to be found.
The Budget specifies reductions to capital budgets and a reserve draw; it does not say how the 1% reduction will be divided among departments or describe it as a cut to day-to-day budgets.
In Parliament on Oct. 28, Chancellor John Healey said the 2027 spending review would set out how the government plans to meet NATO’s commitment to spend 3.5% of GDP on defense by 2035. He separately described 2030 as the target date for reaching 3%. Healey said the review would involve choices over priorities and efficiencies.
The Independent reported that Healey made a related appeal for fiscal discipline in a post-Budget Bloomberg interview, saying Cabinet colleagues would carry spending controls into the review. Its account did not quantify possible additional reductions.
The Institute for Fiscal Studies (IFS) said delivery of the borrowing plan will depend heavily on public-service spending, where growth is expected to slow after this year. IFS Director Helen Miller said, “The plan to reduce borrowing has been pushed back.”
A conditional analysis by the Resolution Foundation estimates that funding for 13 “unprotected” departments would equal 4.7% of GDP by 2031-32 if the 3% defense target is met and real health spending grows by 2.6%. The projection is not a government allocation. Healey said the review would take place in 2027 but gave no specific date.
