Burnham blindsided as Starmer hands him £4.7bn ‘hole’ in war plan

Keir Starmer has risked a major row with his successor after it emerged Andy Burnham did not know the full details of a £4.7bn hole in funding for the UK’s plan for war, The i Paper can reveal. The Prime Minister said the long-awaited Defence Investment Plan (DIP) represented his Government’s “best judgement” of what the country needs to equip the military for potential armed conflict with Russia by 2030. But Burnham, who is expected to enter Downing Street in three weeks, will inherit the task of finding £4.7bn in savings or cuts to pay for the new defence plan, after Rachel Reeves left almost a third of the £15bn package unfunded until the Budget this autumn. The blueprint for defence will cost an extra £15bn and will be paid for in part by a 1 per cent cut to all Whitehall departments’ capital budgets – including a controversial shelving of major road and energy projects that had been pledged by Starmer’s Government, which sparked anger from local Labour MPs and mayors. Burnham did not see all details of the plan But in a written statement following the publication of the DIP, Reeves revealed that while £10.3bn to fund the DIP has been “identified now”, the remaining £4.7bn “will be confirmed at Budget 2026, in a fair and balanced way”. This means that Burnham’s new chancellor, assuming he replaces Reeves if he becomes prime minister, will have to make £4.7bn of cuts in the first Budget of the new administration, or, at the risk of breaking the current Government’s fiscal rules, find the extra spending through borrowing. The parting gift from Starmer and Reeves would appear to undermine Burnham’s optimistic agenda, set out on Monday, reinvigorating the UK’s regions, communities and industries and what he called a “regeneration of places”. Burnham will become prime minister on Monday 20 July, if he is unopposed for the Labour leadership, and Treasury sources said that he had been kept informed about the broad thrust of the DIP. He is expected to replace Reeves as Chancellor, but has committed to the current fiscal rules to bring borrowing down. But when asked whether Burnham knew about the specific cuts to road and energy projects, or whether he was aware that his first Budget would need to find a further £4.7bn to fund the DIP, a source close to the Labour MP for Makerfield said he did not see all the details of the plan. Burnham does however accept that the DIP has now been settled, The i Paper understands. Labour anger at cuts to road building The prospect of cuts to road projects sparked anger among Labour politicians. Hamish Falconer, a Foreign Office minister and Labour MP for Lincoln, issued an appeal to the incoming prime minister to look again at funding plans for a bypass in his region. Falconer wrote on X: “I am disappointed by the uncertainty today about the A46 Newark Bypass widening scheme. “I support further funding for the DIP, but the A46 upgrade programme is well advanced, long awaited, excellent value for money and of strategic importance to both Lincoln and the region. “Following the Labour Party leadership contest, I will be seeking an urgent meeting with the incoming Prime Minister, incoming Chancellor and incoming Secretary of State for Transport to discuss this decision and explore whether there is a credible route forward for this vital project. “I will continue to make the strongest possible case for the investment that both Lincoln and the wider region need and deserve.” Claire Ward, the Labour Mayor for the East Midlands, said: “The proposal to remove investment from two road schemes in the East Midlands, into the A46 and A38 – is completely unacceptable to me. “I was informed of this decision as the Prime Minister was delivering his speech on the Defence Investment Plan. “If Mayors and their regions are to be seen as respected partners of government, we need to be treated like grown-ups and involved in trade-offs which affect our regions.” Ward said she understood that trade-offs were needed to increase investment in defence, adding: “I understand that everywhere will need to contribute so that we can be safe in a less certain world. “What I cannot understand is why the only region being asked to lose £900 million of investment into its roads is the East Midlands — that is not equitable and fails to recognise the decades of underinvestment that have preceded today’s decision.” Spending plan ‘what the country needs’ – Starmer Starmer told an audience of military chiefs and defence industry figures at an airbase in Berkshire that the DIP “represents our best judgement of what the country needs to meet this moment and it is a platform on which I know my successor will build”. He admitted that his Government had had to make “necessary trade-offs” in order to fund it but that he refused to cut day-to-day spending on public services or borrow more. The Prime Minister said: “So the hard truth is that there are no easy answers.” Starmer said the cuts to roads and energy projects were ones deemed not “immediately vital”. The cuts to capital budgets to fund the £10.3bn of identified funding include a 1 per cent reduction in investment spending across Whitehall worth £4bn, £2bn from the Department for Energy Security and Net Zero, up to £700m from Department for Transport roads funding, and £1.1bn from the sale of public land and buildings. For the outstanding £4.7bn, no departments or programmes have been named. Reeves said the money would come from “finding efficiencies, cancelling or delaying lower priority programmes”, with the details to be set out at the autumn Budget. Push to spend more on defence A Treasury source suggested that Reeves and Starmer had done Burnham a favour by nailing down the package before he came to office. According to the DIP, the UK will spend 2.7 per cent of GDP in the financial year 2027-28. Defence insiders insisted it was still on track to increase this to 3.5 per cent by 2035, but a roadmap has not yet been laid out. Military chiefs wanted Starmer and Defence Secretary Dan Jarvis to spell out how spending would reach 3 per cent by 2030. However both men said only that the 3 per cent target would be met “in the next parliament”. Mike Martin, a Lib Dem member of the Defence Select Committee, said: “Without the approval of the next prime minister the Defence Investment Plan is worthless. “It leaves our Armed Forces in limbo and scares off the investment our defence industry desperately needs. I’m calling on Andy Burnham to commit to funding the entire Defence Investment Plan.” John Healey, who resigned as defence secretary in protest at the lack of funding for the DIP, said “more needs to be done in the months ahead”. While he welcomed an additional £1.5bn in money from the Treasury for the plan since his departure, he told the Commons: “Threats are still growing, demands on defence are still rising in this dangerous world, and today’s step means that we will be spending, as a nation, 2.7 per cent of GDP on defence in 2030. The date that Nato now warns we could face a Russian attack.” Healey called on Jarvis to develop a “clear, credible funding plan that will hit 3 per cent and that will meet our Nato commitment of 3.5 per cent by 2035”. Former Tory defence secretary Penny Mordaunt said the money was “not enough”. Jarvis denied that he had given a “hand grenade” to the next chancellor by creating a £4.7bn black hole in the country’s finances. He told The Cathy Newman Show on Sky News: “I know a bit about hand grenades. It’s notone of those. It’s the opposite of those.” “The worst world would have been if we hadn’t sorted this out.” He also ducked a number of questions about whether Burnham had specifically signed off the cuts to the road budget. He said: “Of course, there have been conversations as part of the process of transition.” Max Werner, senior research economist at the Institute for Fiscal Studies, said the decision meant there would be “further impacts on other areas of spending, tax or borrowing on top of those set out in today’s announcements – implying one key early decision for the next prime minister”.