UK defence chiefs are to be awarded a multi-year budget settlement to help pay for drones and other new military technology after prime minister Boris Johnson intervened to negotiate with the Treasury on their behalf.
The new funding agreement is the result of weeks of tense discussions between Downing Street, the Treasury and the Ministry of Defence. It comes after chancellor Rishi Sunak’s decision last month to cancel his comprehensive spending review and instead award government departments a one-year settlement while he assesses the full economic impact of coronavirus.
The settlement could be as much as £16.5bn extra over four years, according to people close to the discussions. The defence budget is just under £41.5bn for the period 2020/21. The government is expected to set out details of the settlement shortly.
Mr Johnson secured a last-minute exemption for defence a week after he promised US president-elect Joe Biden that Britain was determined to remain a valuable military ally.
The spending package is expected to be a big boost for the Royal Navy, which Mr Johnson regards as a highly visible representation his foreign policy, with a crucial role in protecting trade routes.
Mr Johnson’s emphasis on “a maritime strategy” has delighted the Navy, which will step up its role around the world and in patrolling domestic waters, where the search for illegal migrants and defusing potential fisheries disputes could be among its duties.
The deal he agreed with Ben Wallace, defence secretary, on Tuesday is seen as relatively generous at a time when other departments are facing tough spending controls. Senior government officials have warned that new forecasts for the public finances will be “dire”.
Treasury officials confirmed there had been “robust discussions” with Mr Wallace and that the settlement was “obviously a lot of money”. However, they said the deal had been “collectively agreed” with the prime minister and defence secretary.
Military chiefs have repeatedly argued that a one-year settlement could increase waste by allowing continued funding of programmes that are due to be cut in the longer term, and would prevent more ambitious investments in new space and cyber operations. The MoD has also lobbied hard for dedicated funds to pay for upgrades to its Trident nuclear deterrent.
The department’s financial problems have been compounded by a £13bn hole in its 10-year equipment plan, which it says cannot be plugged without a settlement that is guaranteed over several years. The prime minister’s election manifesto promised to increase core defence spending by at least 0.5 per cent above inflation every year of the parliament.
Mr Wallace, who is a long-term political ally of Mr Johnson, appears to have argued successfully that his department should receive special treatment. “They have an underrated alliance — it’s proving rather stronger than you might think,” said one person close to the budget discussions.
The chancellor reluctantly agreed that a multi-year settlement was justified on the basis of securing jobs for people working on military projects and to ensure there was no disruption to projects that were already in train.
Mr Johnson told Mr Biden on November 10 that he looked forward to working with him when he becomes president. Downing Street said the two leaders were committed “to building on this partnership in the years ahead, in areas such as trade and security — including through Nato”. The prime minister is keen to make the case for a strong role for a “global Britain” after the end of the Brexit transition period on January 1.
Meanwhile, Mr Sunak is looking to save money by “temporarily” cutting the government’s commitment to spend 0.7 per cent of gross domestic product on overseas aid to 0.5 per cent, saving about £4bn a year.
Downing Street denied there was a connection between the savings to the aid budget and the uplift in defence spending.