Defense investment plan funding explanation

£1 billion including Barnett results. Positive numbers = increased spending; Negative number = reduction or reduction 2026-27 2027-28 2028-29 2029-30 Total Expenditure 1 Defense Investment Plan 3.4 3.7 3.9 4.0 15.0 2 Total amount of this administration’s increase in the Ministry of National Defense budget (1) 12.5 16.1 16.7 17.3 62.6 3 Total amount of the Ministry of National Defense budget 68.3 73.8 76.5 79.1 297.7 4 NATO spending as a percentage of gross domestic product 2.6% 2.7% 2.7% 2.7% Funding 5 Cut department capital budget by 1% (2) -1.0 -1.0 -1.0 -1.0 -4.0 6 Asset sales (2) 0.0 -0.3 -0.3 -0.5 -1.1 7 Continued international goals and objectives Financial support for efficient defense procurement (2) -0.5 -0.5 -0.7 -0.7 -2.4 8 Additional transport savings department -0.1 -0.2 -0.2 -0.3 -0.8 9 Energy security and net zero savings additional department -0.1 -0.6 -0.7 -0.6 -2.0 10 To be funded as per budget 2026 -1.8 -1.1 -1.0 -0.9 -4.7 11 Total Funding Package -3.4 -3.7 -3.9 -4.0 -15.0

(1) Maintained as a fraction of gross domestic product (GDP) relative to the baseline assumption of the Department of Defense’s projected total department spending limits for 2024-25, based on the Spring 2024 budget.

(2) This line includes funding to increase the MoD’s spending capacity by £3.4 billion over four years, comprising £400 million from the sale of MoD assets, £2.4 billion of Treasury support for international targets and procurement, and £600 million to reset MoD priorities.

explainer

The government has confirmed an additional £15 billion in defense investment plans between 2026-27 and 2029-30. The government will spend more than £60 billion more on defense over the next four years than if spending were maintained according to the plans set out in the spring 2024 budget.

This will ensure the UK is combat ready and modernizes its military capabilities to fight future wars and drive economic growth. The DIP document sets out defense investment totaling £298 billion over the next four years.

From the 27th-28th, the UK will spend 2.7% of GDP on core NATO defense spending, cementing its position as the NATO alliance’s third-largest cash spender after the US and Germany. The government has pledged to increase defense spending to 3% of GDP in the next parliament and will set out funding and plans in the next spending review, which should see defense as a top priority. Together with its NATO allies, the UK has committed to reaching 3.5% of GDP on defense spending by 2035. The UK remains committed to meeting its obligations under its Defense Investment Pledge. All allies will review their trajectories and spending in 2029, when NATO will next review its capability plans.

This is more money for UK defence, spent more effectively to ensure our service people have the capacity to deter and fight while eliminating waste and inefficiencies.

The funding will support a £5 billion investment in drones and autonomous systems, the UK’s largest ever investment in drones and autonomous systems, and learning lessons from Ukraine. This will fund strike and surveillance drones, new hybrid naval forces and unmanned ground vehicles. We will also invest £8.6 billion under the Global Combat Aviation Program with Italy and Japan and £300 million for collaborative combat aircraft development to support the next generation of RAF aircraft. It will invest £11 billion in munitions and weapons to boost Britain’s reserves, as well as at least six new energy plants and £3.2 billion in space capabilities. It will deliver a renewal of the UK’s nuclear deterrent through a £64 billion investment in building new submarines, developing sovereign warheads and purchasing F35A jets.

The Defense Investment Plan provides long-term certainty about government procurement and innovation priorities, supports UK business, focuses private investment and supports high-value jobs and skills across the UK. Aligning defense spending with the Government’s industrial strategy ensures that every penny invested strengthens national security, while boosting growth in key sectors, boosting local economies and putting the UK at the forefront of advanced manufacturing and technology.

At the same time, additional funding will allocate £400 million to the UK’s contribution to multilateral defense mechanisms to support procurement and productivity improvements, enabling joint procurement with allies and supporting higher spending and defense industrial base, and £500 million of a transition fund to enable the transition of the civilian workforce, reduce reliance on consultancy and provide productivity-enhancing investments in AI. This is underpinned by £115 million to be spent by the Department for Science, Innovation and Technology to strengthen defenses against the risks of AI, and a new £50 billion Defense Export Facility to help the UK defense industry compete and create jobs.

Difficult choices have been made, but they are necessary to ensure our capabilities are fit for today and to build our defenses on a sustainable foundation. This includes moving away from aging legacy capabilities in many areas in favor of more advanced and effective technologies. It also includes eliminating waste and inefficiencies, with a new commitment to provide £250m in fraud recovery by 2029-30. There would also be a fundamental reset in the Department of Defense’s financial management, with Defense decision-makers accountable to the Under Secretary of Defense for budget management and annual DIP updates to Congress.

funding

The package reset priorities for public spending, played by fiscal rules and raised funds without taking resources away from routine spending on frontline services. It is mainly funded by reallocating government department budgets, with a currently confirmed amount of £10.3 billion. A further £4.7 billion over four years will be confirmed in a fair and balanced way in Budget 2026.

Departments have been asked to contribute one penny for every pound of their capital budget from this year. We will focus on finding efficiencies, canceling or delaying low-priority programs, and ruthlessly focusing on value for money for taxpayers. The department will also monetize assets, including unused land and buildings, to ensure the government gets maximum value from the £1.9 trillion of assets it holds. Departments will announce details in due course.

As departments with larger capital budgets, additional contributions have been requested from the Department for Transport (DfT) and the Department for Energy Security and Net Zero (DESNZ).

DfT will save up to £700 million on roads funding. The department will discuss cuts to the third road investment strategy (RIS3), including the potential cancellation of the A38 Derby Junctions and A46 Newark Bypass schemes, which have not yet been awarded contracts and are not as far along as other road schemes. There will be stakeholder consultations before a final decision is made.

DfT will also seek limited cuts to road funding, which have not yet been confirmed. The Government is committed to protecting funding for local authorities to fix potholes and repair roads and protect investments in rail infrastructure, including Northern Powerhouse Rail, and this proposal will not affect bus or rail services.

DESNZ will achieve savings of a further £2 billion, including £400 million of financial transactions, during this spending review while maintaining the fastest growing capital budget of all departments. Moving away from fossil fuels is critical to our national security and protects the finances of households, businesses, and governments. DESNZ will continue to protect our clean power mission, drive renewable and nuclear power forward, and reshape our capital budget in a way that protects us from future gas price spikes on our path to energy independence. We will share more detailed plans in the fall.

Removing the defense burden has created an additional £3.4 billion of spending power. This will enable new investments in DIP. This includes £400 million of revenue from MOD asset rationalization and £600 million from adjustments to MOD spending priorities. HMT is also responsible for the cost of additional support for ongoing international objectives, including ensuring Ukraine’s security in the event of a ceasefire, and is securing £2.4 billion through further cost savings through improved procurement. This will free up cash from the MOD’s budget to be invested elsewhere in the DIP. This brings total additional funding to £15 billion, including £11.6 billion in additional cash. This is a new investment for DIP.

We are committed to financial sustainability. We are acting under strict fiscal rules to protect households and businesses from high inflation and interest rates, while ensuring we are ready to defend the UK against new global threats.

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