Former defence secretaries back Healey plan to use war bonds to boost defence spending

Rachel Reeves rejected joining the Global Defence Bank set up by Canadian PM Mark Carney, but her replacement John Healey is understood to be reconsidering it Two former Tory defence secretaries have backed using defence bonds to raise the funds needed to boost spending for the UK’s military and security, which The Independent understands is under consideration by new chancellor John Healey. A senior source who worked with Mr Healey to try to raise extra money for defence before he quit Sir Keir Starmer ’s government has said the chancellor is considering a bid to join a new Canada-led global banking scheme, which would allow it to find cheaper ways to finance defence projects. Mr Healey resigned as defence secretary in June over a failure to meet the requirements in defence spending, claiming the package was £13bn short of what was required meaning the armed forces could not keep Britain safe.

It later emerged another £4.7bn of the £15bn plan was unfunded. But with available money to pay for the new government’s priorities in short supply and Mr Burnham saying he will stick to Labour’s manifesto pledge not to raise income tax, VAT or national insurance, Mr Healey has arrived in the Treasury with few options on how to find an extra £18bn for defence. The Independent understands Mr Healey wanted to join Canadian prime minister Mark Carney ’s Global Defence Bank to raise bonds, but he was blocked by the then-chancellor Rachel Reeves, who was concerned that it would breach her tight borrowing rules.

Now he has replaced Ms Reeves in No 11, he is believed to be trying to revive the bid. The senior source said: “Mark Carney is not exactly a novice, he was the governor of the Bank of England, this was always a good way of raising funds for defence. “We argued and argued for defence bonds through the bank but Reeves was completely cloth eared and would not even engage in the discussion.

“John Healey intends to pursue this idea, he wants to raise the money that we need for defence because he knows better than anyone that it is not a luxury, it is absolutely necessary. They added: “The Canadians were incredibly frustrated as well. They kept on reaching out to Reeves to try to get our involvement in the bank but she just would not listen.

The proposal has the conditional backing of two former defence secretaries. Sir Gavin Williamson told The Independent “We should be looking at all opportunities to see how we can get more money into defence and making sure that our armed forces have the very best. I would hope as chancellor of the Exchequer John will be willing to explore that idea as he was keen to do as defence secretary.

Sir Malcolm Rifkind, who was Tory defence secretary between 1992 and 1995, said it “sounds like a good idea”. “In any event we are being told that HMG have ruled them out, he added. “Nothing is absolute now that Healey and not Reeves is chancellor. Canada, Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine – have signed up to the bank.