Gordon Brown's hidden influence over Burnham's Budget

Gordon Brown left Downing Street more than 16 years ago. But his authority and influence in Labour circles is as strong as ever. Brown remains a persistent presence in the business of government – firing off late-night emails in block capitals to the Chancellor, John Healey , with his thoughts on policy. Earlier this month, Andy Burnham opened a major speech on his vision for the country by declaring “Gordon is right”, echoing a phrase he said he used every week when he worked as an adviser in his Cabinet.

Healey also served under Brown and sees him as a political mentor. His interventions since Labour’s general election victory in 2024 have already helped shape government policy. He campaigned for the abolition of the two-child benefit limit and pressed for higher gambling taxes . Now, he has turned his attention to one of the government’s most consequential decisions: how Britain finances the defence of the nation. According to a source familiar with the discussions, Brown persuaded Burnham and Healey to abandon the prospect of joining a Canadian-led defence bank in favour of a Treasury-backed alternative.

The insider told The i Paper the decision had risked damaging relations with one of Britain’s closest allies. The Defence, Security and Resilience Bank (DSRB), championed by Mark Carney , the Canadian Prime Minister and former Bank of England governor, was established to help countries finance defence and security spending. Its founding charter will be signed by nine countries in Luxembourg on 30 November. The UK will not be among them.

John Healey, first left, was part of Gordon Brown’s Treasury team during the New Labour years (Photo: Peter Macdiarmid/Getty) Instead, the Treasury is pursuing its own plans to help fund a major increase in defence spending without adding to government borrowing. Healey is in advanced talks with at least three other Nato members about setting up an international bank that would finance a “significant” proportion of the additional spending without it counting as new borrowing.

The move is intended to help the Chancellor meet his Budget commitment to increase defence spending to 3 per cent of GDP by 2030, at an estimated cost of £11bn a year, without imposing fresh tax rises or harsh spending cuts. The Treasury is also exploring a mechanism that would allow private companies to provide the upfront funding for equipment such as fast-jet training aircraft and refuelling aircraft, which would then be “leased” back to the Ministry of Defence in return for an annual charge.

The scheme is modelled on the private finance initiative (PFI) used by the Blair-Brown Labour government to fund the upfront costs of its hospital and school-building programme. ‘Brown leant on Burnham and Healey’ However, the source claimed the Canadian-backed scheme would have helped deliver precisely this kind of investment, and blamed Brown for steering Burnham and Healey away from it. “Brown leant on Burnham and Healey and we are where we are,” the source said.

“Essentially they listened to him rather than Mark Carney.” However, Treasury sources are clear the final decision was taken by the Chancellor alone. Brown was brought back into government in May as Keir Starmer’s special envoy on global finance and co-operation, an unpaid, part-time role reporting directly to the prime minister. His brief, according to Downing Street, was to develop international finance partnerships to support defence and security investment, with a particular focus on Britain’s relationship with Europe.

He has stayed in post under Burnham. Both Burnham and Healey served as ministers in Brown’s governments. Healey spent five years in Brown’s Treasury and has called him “an inspiration, a mentor”. A senior Whitehall source said: “I don’t think the public fully comprehend quite how much influence Brown has.” Healey’s change of course is striking because, as defence secretary, he had been one of the strongest advocates within government for keeping Britain involved in the Canadian-led bank.

In January, he had told MPs that the government was “certainly interested” in the Canadian-initiative when questioned by Alex Baker, a Labour MP. Healey also sent a Ministry of Defence observer to the bank’s charter negotiations after the Treasury declined to participate, according to the source. In his resignation letter to Starmer in June, Healey argued that there were “credible ways” of meeting the country’s defence funding pressures by “working multinationally”.

Multiple sources told The i Paper that he was referring to the DSRB. Wes Streeting, the Defence Secretary, also backed it, telling MPs last month he could see the “enormous benefits” of it. Yet as Chancellor, Healey has now committed Britain to a different course. The Treasury is pressing ahead with the Multilateral Defence Mechanism (MDM), a scheme being developed with the Netherlands, Finland and Poland to finance joint arms purchases across Europe.

In Wednesday’s Budget, he announced that treaty negotiations would soon begin. The decision followed weeks of negotiations aimed at finding a way for the British and Canadian initiatives to work together. “It was impossible to find a middle ground,” one source familiar with the discussions said. “Gordon Brown has had an outsized voice on all this,” according to a well-placed source. “[It] feels like the UK only wants to be in charge rather than follow the Canadians.”

This, they said, was ironic given the UK was the first country be offered the opportunity to lead on the DSRB. The Treasury and Canada’s finance department said on Sunday that they had “mutually concluded” that two separate institutions working in partnership offered the best way forward. But insiders close to the discussions said the breakdown had damaged relations. ‘Squabbling sends a terrible signal to Putin’ “It’s caused some rancour at the highest levels… There’s no question about it,” one source added.

The Canadian-led bank is intended to make financing more accessible to governments and defence companies, including smaller businesses struggling to secure commercial lending. The MDM, by contrast, is designed to bring countries together to co-ordinate demand and finance joint arms purchases. The British approach would give governments greater influence over what participating countries could buy such as deciding whether or not it meets certain standards, it is argued.

Only time will tell which approach is the right one, but regardless, a source said that disputes over these financing schemes between countries sent the wrong message to Russian President Vladimir Putin. “All of this also sends a terrible signal to Moscow of a squabbling, fracturing alliance,” they said. “Not good for deterrence posturing.” Gordon Brown and the Treasury have been approached for comment.