Britain’s re-arming drive: Rachel Reeves ‘to slash welfare by £5bn’ and unlock billions for defence spending by repurposing £28bn ‘nationwide wealth fund’ used for inexperienced infrastructure
Rachel Reeves has moved to pump billions of pounds more into boosting the UK’s defences as the Nato crisis deepens.
The Chancellor is changing the remit of the £27.8billion National Wealth Fund so it can be spent on defence.
Previously public-private investment vehicle has been focused on infrastructure projects such as green energy schemes.
Meanwhile, the government is trying to ease the pressure on the public finances by cutting welfare. Some £5billion of savings are being pencilled in, with the long-term sick set to face more work conditions.
The move is designed to avoid deep cuts or more tax rises in the Spring, after higher borrowing costs and stalling growth dealt huge blows to Ms Reeves’ plans.
The UK and European allies are scrambling to make a step change in military capabilities as the US distances itself from the Ukraine war.
Keir Starmer announced last week that the UK will be spending 2.5 per cent of GDP on defence by 2027, with the aid budget being slashed to free up the money.
Chancellor Rachel Reeves (pictured last night) is changing the remit of the £27.8billion National Wealth Fund so it can be spent on defence
How Nato countries’ spending compares as a proportion of GDP
Ms Reeves signed a multi-billion pound UK-Ukraine bilateral loan agreement yesterday, marking the first time money from sanctioned Russian assets will be used for military purposes.
Volodymyr Zelensky said Kyiv would use the £2.26billion loan to manufacture weapons in Ukraine.
He wrote on X: ‘The funds will be directed toward weapons production in Ukraine. I thank the people and government of the United Kingdom for their tremendous support from the very beginning of this war.’
European officials are said to be developing proposals for a new funding mechanism based on looser debt rules.
Ms Reeves told the Sunday Times that ‘the world has changed and we have to keep up with that’.
‘The importance of hard power, of securing our defence is clearly more important today than it has been for a long time,’ she said.
‘Given the circumstances we face, we couldn’t carry on spending what we were on defence and being able to say that we were comfortable with that.’
Work and Pensions Secretary Liz Kendall teed up the welfare curbs today, which could cause unrest on Labour benches.
‘For too long, millions of people have been locked out of work, and we’ve been left with a spiralling benefits bill which is far higher than in many comparable countries,’ she told the Sunday Times.
‘This is terrible for people, for businesses, and our economy. Years of drift and mismanagement have trapped people on benefits, denied them the support they need and damaged their living standards, health and life chances.’
Britain’s Prime Minister, Sir Keir Starmer and Ukrainian President, Volodymyr Zelensky shake hands during a bilateral meeting at 10 Downing Street
