Chancellor unveils £5bn defence investment drive as Britain pledges to boost military spending to 3% of GDP by 2030

Chancellor John Healey has announced plans to unlock up to £5 billion in defence investment and lending over the next four years, as he pledged to strengthen Britain’s armed forces and stand by Ukraine in an increasingly dangerous world. Delivering his first Budget in the House of Commons on Wednesday, the former Defence Secretary confirmed a target of spending 3% of GDP on defence by 2030, with a further commitment to meet NATO’s 3.5% target by 2035.

The Chancellor also announced £10 billion in additional economic and military support for Ukraine , alongside plans to establish a new international defence financing mechanism with European allies. Mr Healey said the measures would strengthen Britain’s national security while creating jobs and revitalising the country’s defence industry. He told MPs: “In this new era of threat, the demands on our UK defence are rising. Keeping the people safe by equipping our armed forces is the first duty of any government.”

Read more: Find out what the Chancellor's statement will really mean for you with LBC's new Budget calculator Read more: Budget 2026 LIVE: Chancellor unveils £100 energy payment for 20 million households Speaking about his own experience, the Chancellor revealed that his son, an Army reservist, had returned from training four years ago complaining that troops lacked basic equipment and ammunition. “I say this as Chancellor, I say this as former Defence Secretary, and I say this as a dad whose son is an Army reservist,” he said.

“A reservist that came back four years ago from early training to say they had no kit and they had no bullets to fire. That’s the truth.” Mr Healey accused successive Conservative governments of having “hollowed out and underfunded” Britain’s armed forces during their 14 years in power. He said Labour had delivered the largest increase in defence spending since the end of the Cold War, claiming this year’s defence budget was £14 billion higher than in the Conservatives’ final year in government.

Under the new proposals, the National Wealth Fund and British Business Bank will direct up to £5 billion of investment and lending towards defence, dual-use technologies and sovereign capabilities over the next four years. The move forms part of a wider effort to attract private investment into Britain’s defence industry, including through public-private partnerships. Mr Healey also announced the creation of an Innovative Defence Finance Task Force, which will explore new ways of financing military investment ahead of next year’s Spending Review.

The Chancellor confirmed that Britain would begin formal treaty negotiations with Finland, Poland and the Netherlands over a new Multilateral Defence Mechanism. The organisation would aim to increase defence investment and allow NATO allies to purchase military equipment jointly, potentially reducing costs and accelerating procurement. However, while confirming the target of reaching 3% of GDP on defence by 2030, Mr Healey said the detailed funding plans would not be set out until next year’s Spending Review.

He said: “Today I’m getting work underway to get there in a fiscally sustainable way.” That work would include a further examination of public spending, alongside efforts to secure financing from private investors and international allies. The announcement comes amid mounting pressure on the Government to demonstrate how it intends to finance Britain’s growing military commitments while keeping public spending under control. On the ongoing war in Ukraine, Mr Healey revealed that he and Prime Minister Andy Burnham had spoken to President Volodymyr Zelensky earlier on Wednesday to outline Britain’s latest commitments.

The Chancellor said the Ukrainian leader responded by telling them: “You’ve made my day.” The £10 billion package will include support through loans and export finance guarantees, as well as additional urgent military assistance for the coming winter. Mr Healey slammed Russia’s latest ballistic missile strikes against Kyiv and insisted Britain would maintain its support for Ukraine. “The whole House, the whole country is united for Ukraine, and today we send a clear message to Moscow: Britain will stand with Ukraine for as long as it takes.”

The Chancellor also argued that increased military investment would provide an opportunity to rebuild Britain’s defence manufacturing base. He singled out Barrow, Rosyth, Aldershot, Plymouth, Glasgow and Belfast as places that could benefit from greater investment in defence industries. “I will ensure this record defence investment works twice — once for our national security and once for British jobs and British business,” he said. He pledged: “Security for our nation, jobs for our people, fresh hope for the future delivered for Britain by this Labour government.”