Britain has no money for defence – Chancellor Reeves in talks over ‘war bonds’ to fund defence spending

Pic.: Imperial War Museums

Rachel Reeves is considering issuing war bonds to fund increased defence spending, ‘The Telegraph’ has learnt.

Members of the public and financial institutions would be able to buy bonds to raise money that would be ring-fenced for national security.

The Chancellor is reviewing whether this could solve the impasse over how to raise £17.6bn to meet the Government’s pledge to increase defence spending to 3 per cent of GDP by 2029-2030.

John Healey, the Defence Secretary, is understood to be interested in the idea, which has been raised with him privately in recent weeks.

Issuing bonds would be less politically problematic than cutting the welfare budget to fund defence, which military chiefs and some Cabinet ministers have backed in recent weeks.

Lord Hain, a Labour peer who was a Cabinet minister in the Brown and Blair governments, has argued that the Government should “promote extra borrowing solely for defence purposes by issuing a special purpose vehicle in the form of a defence bond up to set limits”. He is understood to have raised the idea with both Ms Reeves and Sir Keir.

Writing for Labour List, he said that the Second World War provided a “useful precedent because fiscal rules were modified then for exceptional, and exceptionally dangerous, times”.

The Treasury would hope that war bonds would raise money more cheaply than ordinary gilts by tapping into patriotism and strong market demand for defence investments.

Earlier this year, Sir Ed Davey, the Liberal Democrat leader, said the Government should start selling war bonds as there was a need to “move far faster” on UK defence spending.

Under his party’s plan, members of the public could loan the Government money in the form of a bond which would run over a two- to three-year period and pay out the same interest as standard government bonds.

...Lord Hain recalls Britain's history, but he recalls it selectively. If the USSR hadn't defeated Hitler, Germany would have defeated Britain most probably. Now London and Moscow are at odds. And the US won't help London — Trump is pulling America out of Europe.

London has no chance of victory — with or without new “war bonds”.

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