Defence Investment Plan

Debate between Baroness Goldie and Lord Fox

Wednesday 1st July 2026 Lords Chamber

[Baroness Goldie (Con)]

My Lords, I thank the Minister for both the briefing and prior sight of the defence investment plan, which he provided to me and my colleague, the noble Earl, Lord Minto, yesterday. I doubt any plan was so dogged by delay and preceded by such drama as this one, but that doleful prelude was eclipsed by the gloom and scepticism that engulfed the plan when it became public. To quote my honourable friend in the other place, Mr James Cartlidge, it is “too little, too late”.

The threat we face is now. This plan, lacking in significant detail, is for the next four years. It was intended to deliver the recommendations in the SDR. It does not. It should have laid out a path to the 3% of GDP needed before the end of this Parliament, never mind during the next one. It does not. As for a path to NATO’s target of 3.5% of GDP by 2035, that apparently remains in the mists of the Prime Minister’s imagination: undiscernible and shortly to disappear.

The Prime Minister criticises the previous Government for not spending enough, but I point out to your Lordships that my party responded to the threat as we understood it then, in the wake of a searing economic challenge inherited from a Labour Government in 2010. However, despite austerity, we kept the RAF Lossiemouth air base open; ordered the vital Poseidon planes that operate from there; ordered eight Type 26 frigates and five Type 31 frigates, which are being built now; launched the Global Combat Air Programme to produce the next-generation fighter; and commissioned the Dreadnought programme to renew our nuclear deterrent. I am not going to speculate on Mr Burnham’s Harry Potter powers to wave a magic wand to fix this deficient defence investment plan. Given his projected political strategy to date, fixing defence is not on any wish list I have seen. However, I know that none of this is the Minister’s making. He is here to answer questions, which I know he will do with his customary loyalty, integrity and courtesy.

I will start with the Secretary of State’s foreword to the plan. If we strip out the roseate language, £298 billion is to be spent over the next four years. Some £283 billion of that is not new money; it is simply what is required to keep the doors open, pay the people turning up and ensure that the day-to-day bills are paid. The crux question is: how much is needed on top of that? The Chief of the Defence Staff, Sir Richard Knighton, says that £28 billion of additional money is needed over the next four years to do what must be done to keep us safe. My party is prepared to answer that call and fund it by reinstating the two-child benefit cap, reallocating up to £50 billion currently being spent on welfare and costly net-zero projects, and scrapping Labour’s catastrophic Chagos deal. This Government are not prepared to answer that call and will short-change defence by the £13 billion that they were never going to provide. That is completely unacceptable.

The former Secretary of State, John Healey, has said that this plan leaves the country “less safe”. The authors of the strategic defence review have said that the funding package is “not enough”. What will it take for the Government to listen to the service chiefs, the retired senior officers, and indeed members of their own party, and find the money that they all say is needed to keep us safe?

Even the inadequate £15 billion that the Government are going to provide immediately starts to fall apart under scrutiny. We know from the Chancellor that £4.7 billion is not there. According to the accompanying funding explainer, it is to be allocated at the Autumn Budget, presumably by a new Prime Minister and a new and as yet unknown Chancellor.

If this were not bad enough, page 73 of the Defence Investment Plan is revealing. It discloses that £10.7 billion of the £15 billion is to come from “defence efficiencies” over four years. So, as we speak, that money is not there either. This is accountancy smoke and mirrors. On the defence efficiencies, £1.1 billion is to come from “reform and service redesign”—so what reform, what redesign and what details can the Minister provide? Some £3.3 billion is to come through “workforce and resourcing”. What does that mean and what detail is available? Some £2 billion is to come through “infrastructure”. What infrastructure? How is that money to be provided? Some £0.2 billion is to come through “digital”—how? Some £3.7 billion is to come through “acquisition and supply chain”. How has that figure been arrived at, and what underpins that estimate? The more alert among your Lordships will have noticed that that totals £10.3 billion, not the £10.7 billion that is at the head of the defence reform efficiencies. So we have another £400 million whistling into the blue yonder. Separately, the plan also states that £1.1 billion will come from asset sales, so what assets will the Government flog off?

Unless the questions I have posed can be answered, this plan is meaningless. NATO, the MoD, politicians and the public need clarity about how much money is being given, when it is coming and how it is being provided. Smoke and mirrors and Treasury trickery do not cut it.

[Lord Fox (LD)]

My Lords, this is clearly a very delayed and extremely underfunded plan. As we have heard, at £15 billion it falls well short of the £28 billion requested by the defence chief to keep our country secure. But we know that it actually falls even shorter than that, as nearly £5 billion is unfunded and some £11 billion or more relies on undetermined efficiency savings. So, after months of paralysis, resignations and Cabinet chaos, the Government have short-changed the Armed Forces.

However, we should remember that it was the Conservatives who hollowed out our military, leaving the Army and Navy smaller than they had been for hundreds of years. The Tories failed to look after service personnel properly, through a lack of suitable housing and poor mental health support—that was unforgivable.

This Statement is a long way from solving these vital issues and many others. It is a political choice made by Sir Keir Starmer and the Treasury, and it leaves us less safe. Furthermore, it undermines our reputation as a leader in NATO. Last year, all NATO countries pledged substantially to increase investment so that we all hit 3.5% of GDP by 2035. But, even if the missing money is found, the share of GDP that we spend on defence by the end of the decade will be only 2.7%. In media interviews today, the Procurement Minister, Luke Pollard, said that the spending review next year will describe a pathway to 3.5%. That review will need to find an extra £25 billion per year to get to our stated target. Given where we are starting from, this is hardly credible.

This lack of credibility is not just a domestic phenomenon. When I attend NATO Parliamentary Assembly meetings, I can sense the reputation of the UK falling back. This is more than just worrying. So I will suggest some ways to increase investment and leverage what resources we have more effectively. The Liberal Democrats’ plan for defence bonds would provide an additional £20 billion at least, funnelling in private sector investment. This is not pie in the sky. Poland’s armed forces support fund, for example, was established in 2022, with the main source of funds being issuing bonds. For context, last year Poland spent 4.7% of its GDP on defence.

There are better ways of leveraging our existing defence spend. The UK could take part in the nascent defence, security and resilience bank. This ticks a number of important boxes: it would be multilateral; it would work with a greater number of allies; it would help project financing to span election cycles; and it would cost-effectively pull in private finance, multiplying our state investment by many times. The Canadian Prime Minister, Mark Carney, is a major proponent of this initiative. He met with Sir Keir’s envoy, Gordon Brown, last month to discuss it but, disappointingly, there seems to have been no progress.

The Government could also take bolder steps towards working with our European allies. Last month, the Lib Dems announced a plan for a UK-EU defence pact, including our intention to join Security Action for Europe—the SAFE programme. Andy Burnham is quoted as having said favourable things about both defence bonds and the DSR bank. He has also been historically in favour of closer relations with the EU. Does the Minister agree that the new Burnham-led Government should issue defence bonds, work with Canada to deliver the DSR and join the SAFE initiative in Europe?

There are also ways of making our spend on big ticket items go a bit further. For example, GCAP currently involves the UK, Japan and Italy. Canada, Saudi and possibly Germany have been mooted as additional partners. Can the Minister confirm that, through adding to the GCAP group, money could be diverted to other UK defence needs?

Much has been made of the headline spend of £5 billion for advanced uncrewed systems over the rest of this Parliament. I am sure this is welcome, as these systems are at the heart of modern warfare. However, to put this into context, the three-year £5 billion investment is only a tiny percentage of the plan’s £298 billion spend over four years.

We welcome the commitment to establish six new energetics factories by 2030. However, the nine-month delay in publishing this spending plan has frozen procurement and put many SMEs in peril. Now that we have a funding plan, how will the Government change the procurement process to give SMEs the certainty to invest and the cash flow to thrive?

Finally, last year’s strategic defence review rightly stated that national resilience cannot be bought with military equipment alone. It stressed the need for a comprehensive national conversation to shift our mindset and prepare the wider British public, local government and business for the hybrid, cyber and non-traditional threats that we already face. This is a whole of society challenge that spans far beyond the MoD, so what concrete progress is the Minister making with his government colleagues to initiate this national conversation?

Defence Industrial Strategy

Debate between Baroness Goldie and Lord Fox

Wednesday 10th September 2025 Lords Chamber

[Baroness Goldie (Con)]

My Lords, I place on record my support for the enormous amount of work that has clearly gone into the production of this industrial strategy. It is very evident that those at the Ministry of Defence have put their thinking caps on, done the hard work and constructed a plan based around defence’s current and future requirements. There is therefore much to be applauded. The six priority outcomes are absolutely aiming in the right direction and the commitment to strengthening the MoD’s links with SMEs is particularly welcome.

A strong industrial base is vital for the future of our Armed Forces and our defensive resilience as a whole. The need has never been more evident than today, when we have seen a Russian incursion into a NATO ally’s airspace and the largest attack in Ukraine by Russia to date. This escalation is deeply troubling and underlines the importance of swiftly putting Britain into war-fighting readiness.

This is a solid piece of work, but the caveat is this: the solid piece of work crumbles if the bricks are not cemented together. That cement is implementation at a wartime pace. What matters now is that the words on these pages are translated into missiles, drones, equipment and ships. Critical to this is procurement. The chilling reality is that procurement has essentially dried up. There have been promising words in the SDR, but we have yet to see the major procurement contracts that the MoD has promised.

Procurement is the lifeblood of a successful industrial strategy. For example, I ask the Minister: how will the Government ensure that the Typhoon factory in Warton remains open and thriving? We have heard that the Government will be opening up six new munitions factories, but they must have orders. When will they be placed?

I understand that the promised defence investment plan will detail much of the procurement endeavour, but when? The defence industry has been waiting with bated breath since July of last year, and industry must have greater certainty. I implore the Minister to do everything in his power to ensure that the defence investment plan is published as soon as possible. In that connection, will the UK’s defence orders be joining a queue or with they be prioritised over orders for export?

When it comes to the new structures within the MoD, co-ordination of accountability to the Secretary of State is paramount. At the same time, duplication must be eradicated. The SDR and this strategy both mention the creation of a number of new bodies within the MoD: UK Defence Innovation, the Defence Industrial Joint Council, the office of defence exports, a defence office for small business growth and the national armaments director.

The strategic defence review identified a 10% reduction in Civil Service costs by 2030. Can the Minister clarify how, with the addition of these new offices, the MoD will achieve that staffing cost reduction? What existing structures will be merged or abolished, and who will be auditing progress? While I am on this topic, can the Minister update the House on the progress of appointing the national armaments director?

Page 30 of the industrial strategy details nine milestones to be reached by the end of this year. I do not believe any of these have as yet materialised, and the end of the year is fast approaching. Is the Minister confident that the 2025 timeline will be met?

In conclusion, I raise an issue that will come as no surprise to the Minister—budget. My right honourable friend the shadow Secretary of State and I have raised concerns about the bundling together of intelligence spending within the defence budget. That means that, despite the Government’s claims of spending 2.6% of GDP on defence by 2027, the actual money available to the MoD for defence spending is 2.2% of GDP. I am not trying to catch the Minister out, but I want to make this clear: the Government may have increased defence spending, but this level of spend is simply not enough to deliver everything in the SDR and indeed in this industrial strategy.

The Russian incursion into Polish airspace yesterday and the triggering of Article 4 of the North Atlantic Treaty serve as a stark warning: complacency is not an option. The contents of this strategy, which, as I have said, these Benches fully support, cannot be a prayer for the future. Wartime pace means delivering from now on and, quite simply, there is no safe alternative.

[Lord Fox (LD)]

My Lords, it is a pleasure and a challenge to follow the noble Baroness, Lady Goldie, who has such expertise in this area. We on these Benches also welcome the Government’s announcement of this new defence industrial strategy. We support the objectives of both boosting defence capability and increasing economic activity within our country. As someone who has worked in the sector—I no longer have an interest in it—I can say that, in the main, the jobs in the defence sector are high-quality jobs that pay well over the national average, so they are very worthwhile jobs for our citizens. More than that, they will contribute in large measure, we hope, to the resilience and security of our country.

Like the noble Baroness, Lady Goldie, I will focus on procurement. I will not repeat the questions that she has already asked, although I am very interested in the answers. It is clear that an improved framework is needed and that, in the Government’s own words, waste, delay and complexity have prevailed. Big changes are therefore needed. We also support the aims of involving more SMEs and driving innovation. These are important, but how? Section 7 of the strategy sets out some details of process, but I would suggest that, as well as process, this all requires an entire change of culture across the sector, from the MoD to the primes and the SMEs. How will the Government fast-track the necessary culture changes that we need in order to move at pace?

The implementation of a UK offset regime is welcome and the sections in the strategy are encouraging. I appreciate that consultation is needed, but I also note that there are—we hope—contracts being let already before this regime is put in. Can the Minister tell your Lordships’ House how any offsets will be gained from contracts that are let before then?

Similarly, a buy British focus is really good and very important. However, some contracts are being let at the moment that do the exact opposite. They are contracts that may call into question the future of established capacity in this country: capacity that, once lost, will not be regained. Can the Minister therefore ensure that these are reviewed as soon as possible to ensure that permanent damage is not being done before this strategy is implemented. I will be happy to discuss further details on that with the Minister.

In the Spring Statement, Rachel Reeves confirmed an extra £2.2 billion of UK military funding. This increase will be paid for by cuts in overseas aid, which the Minister knows we deplore. This strategy contains spending of £773 million on the Government’s estimate, but can the Minister confirm that this is not in fact new money, but money out of the pot that was announced in the spring by the Chancellor? At the time, the Chancellor also announced the new Defence Growth Board. Can the Minister say what role this will play, and indeed what role it has played in the preparation of this strategy? How does this fit with the new defence investors advisory group that is announced in the strategy?

I also seek information on the whereabouts of the Defence Growth Partnership, which has been in place for some time and shares many of the same aims, particularly around SMEs and innovation. What is its role? Is it still working and how does it contribute?

A key drag on the success of this strategy will be the lack of available skills. Part of this announcement includes skills investment, which is largely focused on five new defence technology colleges. This is also welcome, as is the emphasis on apprentices. However, what is the role of Skills England in all this, given that it was supposed to be part of the picture on the national skills programme.

Following events, it is very clear that things are moving very fast globally, and moving in the wrong direction. They underscore the vital importance of working alongside our European allies in securing the UK’s defence. As I am sure the Minister will tell us, we continue to play key roles in JEF, E3 and other groupings, while NATO is of course our foremost security defence relationship and always will be. However, more can be done to deepen the co-operation and integration with our European allies. They share security challenges and together we can build scale to rearm at pace. Will the Government, for example, now agree to seek the UK’s associate membership of the European Defence Agency?

While EU institutions have a more limited role in defence, the Security Action for Europe—SAFE—defence fund is being established by the EU Commission. Recognising the opportunity that SAFE presents, the Minister of State, Stephen Doughty, told the Foreign Affairs Select Committee on Monday:

“It is a €150 billion instrument. It is very significant and could lead to significant opportunities for our defence industries”.


Can the Minister therefore update your Lordships’ House on the UK’s discussions with the Commission and the nation states on our participation in SAFE and tell us whether UK industry will be eligible to bid in the first round, which I believe is in November?

I have lots more queries, but I close by saying that this strategy is a first step and I absolutely concur with the noble Baroness that implementation is key to its success. We will happily support and work with the Government to help deliver the strategy and its objectives.