Healey’s budget to duck setting a date for 3% defence spending target

John Healey, the UK’s new Chancellor, urged his international counterparts to “step up” cooperation during his arrival at the first G20 summit in Asheville, North Carolina. Speaking ahead of the meeting of global finance ministers on Monday, Healey highlighted pressing global challenges such as the Middle East crisis, energy prices, the cost of living, and economic growth. He emphasized that while the UK is in a relatively strong financial position, having recorded the fastest growth among G7 nations in the first half of the year and reducing its deficit more rapidly than any other G7 country, it cannot address these issues in isolation. “No country can face these pressures alone,” he said, stressing the need for collective action to enhance economic resilience and provide relief to households and businesses. Healey is expected to discuss defence spending during the summit but will avoid setting a specific date for achieving the 3% of GDP defence spending target. Instead, he will outline a pathway to meet the goal at the 2027 spending review. This approach follows previous discussions with Canadian Prime Minister Justin Trudeau and U.S. Treasury Secretary Scott Bessent, where both leaders expressed willingness to cooperate on defence funding mechanisms, though no formal merger was agreed upon. The fiscal constraints facing Healey have become evident after official data revealed that government borrowing increased to £1.8 billion in July, marking a 68.7% rise compared to the same period last year. Despite record income tax receipts, inflation climbed to a four-month high of 2.9%, influenced by tensions stemming from the Iran conflict. Economic experts, including the National Institute of Economic and Social Research, have cautioned that Healey may need to consider raising taxes or cutting expenditures to maintain fiscal balance, as public finances remain under strain. Healey has informed the Cabinet that austerity measures may be necessary to fund some of the new commitments. His economic strategy is framed around fiscal discipline, aligning with the rules established by his predecessor, Rachel Reeves. During an interview with Sky News, Healey reiterated that fiscal responsibility is essential for economic stability, stating, “We simply can’t deal with the problems we face as a country by maxing out the country’s credit card.” The decision to defer the 3% defence spending target has drawn criticism. In his resignation letter as Defence Secretary earlier this year, Healey had argued that setting a 2030 deadline for the 3% target was crucial given escalating global conflicts and security threats. However, since becoming Chancellor, he has opted to delay announcing a specific date, choosing instead to focus on fully funding the defence investment plan in his upcoming budget on 28 October. The Treasury has confirmed that further details on the timeline will be addressed during the 2027 spending review, with no firm date yet set. Defence spending is projected to reach 2.7% of GDP by 2030, partially supported by reductions in UK aid spending. While the military maintains confidence that Healey will eventually commit to the 3% target, critics argue that postponing the announcement undermines national security commitments and risks straining relationships with key allies, particularly the United States. Reform UK leader Nigel Farage criticized Healey for appearing to prioritize welfare over defence, noting that he had long promoted military interests before taking on the role of Chancellor. As Healey prepares for the G20 summit, discussions will also center on global economic outlooks, shaped by persistent high energy costs, fluctuating government bond markets, and ongoing trade disputes between the U.S. and Canada. The meeting underscores the complex interplay between domestic fiscal management and international economic coordination.