The Defence Investment Plan (DIP) ends more than a decade of fiction in British defence finance. By the time the Ministry of Defence’s (MOD) last ten-year Defence Equipment Plan was published, around a month into the premiership of Rishi Sunak, the gap between spending and money available was £17 billion. After that, the Conservative administration produced no long-term costings at all.
The DIP was supposed to deliver the commitments that the administration of Sir Keir Starmer, Prime Minister, signed up to in last year’s Strategic Defence Review (SDR): a ten-year programme to match the ten-year vision of the Review. However, it does not.
Sir Keir made the reasons explicit in his speech announcing the DIP. He was unwilling to use increased borrowing in any form – including the ‘defence bonds’ requested by industry groups such as Make UK – and had reached the limits of departmental budget reallocation.
As a result, the ten-year programme is only financed over the next four years, and takes the United Kingdom’s (UK) defence spending only to 2.7% of Gross Domestic Product (GDP) in the fiscal year 2029, leaving the Prime Minister’s pledge of 3% by 2030 hard to reach, and the North Atlantic Treaty Organisation (NATO) target of 3.5%+1.5% of GDP on defence and related infrastructure effectively notional. Just under £5 billion of the allocated cash is to be found at the next Budget.
As John Healey, former Secretary of State for Defence – who made most of the choices contained in the DIP before resigning – put it, the Prime Minister was ‘unable’ and Rachel Reeves, Chancellor of the Exchequer, was ‘unwilling’ to fund rearmament at the scale required by the SDR. Whatever happens under the expected premiership of Andy Burnham, the DIP must be judged a failure against the aspirations laid out in the SDR.
During the political spat that led to Healey’s resignation, the descriptor used internally by those with sight of the DIP was ‘scalable’: it is built for a necessarily constrained spending envelope today, but contains choices that would allow capabilities to be expanded should the political argument over money turn in favour of comprehensive rearmament.
What is welcome is the strategic nature of the choices made. The standout commitments are to upgrade the nuclear deterrent, the next generation of nuclear-powered attack submarines (SSNs) via AUKUS, the Global Combat Air Programme (GCAP), and the munitions stockpile. The standout platform deletions are commitments to crewed air defence destroyers, reconnaissance helicopters, and the so-far notional Type 32 general purpose frigate.
In their place, the vision of Gen. Sir Gwyn Jenkins, First Sea Lord, for a ‘hybrid navy’ by 2029 gets backing for the purchase of a mixture of crewed and uncrewed naval drone and missile platforms. No other major naval power is abandoning conventional power projection platforms with such alacrity, and the proof of the pudding will be in the eating (sometime in the 2030s).
The GCAP budget allocation is a major signal – not just to allies and industrial partners, but geopolitically. Once operational, the Tempest airframe will give Britain a genuine, sixth-generation air combat system that is independent of the United States (US), in a world where European partners have failed to produce one and where the other major players will consist of the People’s Republic of China (PRC) and America. It is a bet not only on the concept of a ‘system of systems’ in air combat, but on British industry, with BAE Systems and its supply chain standing to become global players in a very limited but strategically vital ecosystem.
The irony is that, since the publication of the Defence Industrial Strategy in 2025, and the formation of the National Armaments Directorate within the MOD, the UK has had a metaphorical Formula 1 car ready to race in terms of industrial transformation. With the appointment of Rupert Pearce as National Armaments Director (NAD), it has a driver. What it has lacked is fuel in the tank and a race plan. The DIP provides fuel for four out of the next ten years, leaving the next administration to take the tough decisions.
Sir Keir’s determination to slap down the idea of defence bonds, and the allocation of £400 million to the Multilateral Defence Mechanism (MDM), backed by His Majesty’s (HM) Treasury, might both be read as attempts to limit the options of the incoming administration. The MDM – a joint procurement initiative with Finland and the Netherlands – has been counterposed by HM Treasury to the Canadian-backed Defence Security and Resilience Bank (DSRB), which looks set to launch at the upcoming NATO summit in Ankara. Defence bonds have been advocated by numerous industry bodies and think tanks. It is clear that without either major welfare cuts or some mixture of hypothecated and multilateral borrowing, British rearmament cannot match the escalated nature of the threat.
Assuming he becomes Britain’s next Prime Minister, Burnham’s first budget is unlikely to prioritise defence. Thus, the framework for the next phase of rearmament will likely be set at the next Spending Review, in Q1 2027 – a milestone Starmer signalled in his speech, and Healey in his backbench intervention. By then, either the Labour government finds more money – whether through borrowing, taxation, or reallocation – or the 3% target is toast and the 3.5% might be judged fictional.
The contrast between the UK’s hesitant spending commitments and those of its allies is already stark. Poland, Lithuania, Latvia, Estonia, Norway, Denmark, Greece, Türkiye, and Germany all have firm spending commitments of 3.5% of GDP by 2030. More importantly, Germany has, for the first time since 1995, overtaken Britain in absolute cash spending terms (in current US dollars).
This places the UK’s ambition to be America’s ‘leading European ally’ in question. With the European Union’s (EU) Security Action For Europe (SAFE) instrument giving the European Commission shaping power over allied defence industrial collaboration, this could, in the worst case, leave British firms out in the cold, and the UK without the power to shape capability and force structures for the defence of the continent.
Although the DIP is a major and immediate uplift, sending a clear demand signal throughout the British defence sector, it falls way short of what is needed to deliver the NATO target. Additionally, the fact remains that it is a plan issued by an administration that will not exist by 20th July, after a political crisis that saw two defence ministers – both highly respected in the sector – quit.
In other words, the story of the SDR, the DIP, and the NATO targets is far from concluded.
Paul Mason is an Adjunct Fellow at the Council on Geostrategy; and a journalist, author, and political researcher.
This article is part of the Council on Geostrategy’s Strategic Defence Unit.
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More money is needed. Starmer rightly pointed out that debt is debt, as Rishi famously pointed out to Liz in the contest for the leadership of the Tory Party. But zero-coupon bonds, as advocated by some right-wing economists, (no interest, with relief from the capital gain) might have a role, and borrowing for investment as opposed to day to day costs is within the present fiscal rules, providing the overall level of debt is falling by the end of this Parliament. And then there is the battle for public opinion, with politicians and journalists making points like "Putin isn't going to mount a land invasion", and "there are lots of other NATO countries between us and the Russians" - essentially Jarvis's point. We need some simple explainers of how it is Putin's aim to crumble NATO, as the US backs away, the US nuke umbrella fades in credibility, and we really all need to step up.
BTW this is not just FLAWED it’s an obituary for His Majesty’s Armless Services.