Ministry of Defence: Budget Shortfall

Lord Coaker Excerpts

Thursday 15th January 2026 Lords Chamber

[Lord Young of Cookham]

To ask His Majesty’s Government whether there is a shortfall of £28 billion in the budget of the Ministry of Defence over the next four years.

[The Minister of State, Ministry of Defence (Lord Coaker) (Lab)]

My Lords, the defence investment plan will set out how we will deliver the vision set out in the Strategic Defence Review. It will be a coherent, fully costed and affordable plan against the defence budget. Over the course of this Parliament, the Government have committed to the greatest sustained investment since the Cold War, with over £270 billion going into defence. We have set a further ambition to spend 3% in the next Parliament and joined NATO allies in a commitment to spend 5% on national security from 2035.

[Lord Young of Cookham (Con)]

I am grateful to the Minister for that reply. The Chief of the Defence Staff has rightly warned the country about the growing threat from Russia and other countries and the need for adequate preparation. In response to questions about the £28 billion shortfall on Monday before the Defence Select Committee in another place, the Chief of the Defence Staff, while not directly answering the question, said:

“Right now, we are in a position where we are forecasting to spend more than the budget we have”.


Does it not follow that without extra cash from the Treasury, over and above the sums the Minister has just referred to, the Government may have to postpone or abandon major programmes?

[Lord Coaker (Lab)]

The defence investment plan will deal with choices according to the budget that it has set for it. Even if you increase the budget, you still have to make choices about what you spend that money on. The Chief of the Defence Staff and the other chiefs are involved in this, discussing what capabilities we need, with the budget that we have, to ensure that we have the war-fighting readiness we need. Those choices are taking place.

Considerable sums of money are being spent at present—billions of pounds. I keep repeating this: under current plans, the total budget in 2024-25 was £60.2 billion; in 2008-29, on current plans, it will be £73.5 billion. Billions of pounds of additional money is being spent. We are seeking to ensure that we spend it properly and appropriately to fight the wars of the future.

[Lord Stirrup (CB)]

My Lords, the Minister is quite right, but he knows as well as the rest of us that those are meaningless figures: what really matters is how much you can buy for the money you are spending. Given the accounting changes that have taken place over the intervening years, we are currently spending a lower percentage of GDP on defence than we were in 2010, when we were not facing the very serious threats to European security that we see today. How do the Government explain this?

[Lord Coaker (Lab)]

The Government explain it by using the figures I have just outlined. There is billions of pounds of additional money. You cannot alter the fact that it is going from the figure I just gave to the noble Lord, Lord Young, to the figure it will be. The noble and gallant Lord knows far better than me that choices have to be made within that budget about what capabilities you will spend it upon. One of the choices that confronts us is what lessons we learn from Ukraine, and what capabilities we need to ensure that we fight the war of the future and not the war of the past. That is part of the discussion that is going on at present.

[Lord Bruce of Bennachie (LD)]

Is not the reality that the defence investment plan has been delayed because of concerns inside government and the Cabinet about its affordability, especially given the commitment to increase our own sovereign capacity? In that context, is not the reality that cuts will have to be made to achieve that, and simply to fulfil the current budget? Will the Government recognise that we need to have a much clearer and honest declaration of exactly what is needed? The public need to know what the threat is and why we need to spend more on it.

[Lord Coaker (Lab)]

I agree with the last point about making sure that the public have greater awareness of the threats faced, and the national conversation. The noble Lord has asked me about that before, and we are seeking to do something about it.

Within the current budgets, we have signed more than 1,000 defence contracts since July 2024, 86% with British-based businesses, and spent more than £31 billion with UK industry. If the noble Lord were Secretary of State for Defence, he would have a budget and would have to make choices about which capabilities he believed were necessary to bring the country to the war-fighting readiness we need. Those are the discussions at the present time. I know there is frustration about the delay to the defence investment plan, but I would rather have a plan that is affordable and meets the needs of our Armed Forces and defence industry, so that we can fight the wars of the future.

[Lord Brennan of Canton (Lab)]

My Lords, I welcome the Government’s commitment to increasing defence spending. It is not just about the quantum; it is also about dealing with project overruns and delays, cancelled projects, poor management and the contract overspending that we saw under the last Government. What will this Government do to make sure that our defence spending is actually well spent?

[Lord Coaker (Lab)]

My noble friend will know the importance of his question. That is why reform has taken place within the Ministry of Defence with the establishment of the National Armaments Director Group. The new National Armaments Director is in post and is addressing the very real problems and concerns my noble friend has rightly pointed out.

[Viscount Trenchard (Con)]

My Lords, I am not sure whether the Minister actually acknowledged the shortfall of £28 billion as identified by the Chief of the Defence Staff and the other chiefs. I understand that we must wait for the defence investment plan, but can he say whether the shortfall, or cash squeeze, that the Ministry of Defence is facing is the reason for the delay in GIGO’s award of its first contract to Edgewing with regard to the GCAP trilateral fighter jet project?

[Lord Coaker (Lab)]

Many decisions will be subject to the defence investment plan. The noble Viscount has been an advocate of the GCAP programme for a number of years and was berating me a few months ago regarding whether the Government support the programme. He knows that the Government support it, and he has seen the importance of the relationship between Japan, Italy and the UK. The specifics of that contract will have to wait, but the overall support for GCAP is there and has been well stated in this Chamber and beyond.

[Lord Harlech (Con)]

My Lords, I declare an interest as a serving Army Reserve officer—I will be on the live firing ranges with my battalion this weekend. I bring that up because we are hearing worrying signals across the Army Reserve that reserve service days and special taskings are being turned off to meet budgetary requirements. Will the Minister assure the House that in the forthcoming defence investment plan, all reserve force budgets will be protected and boosted to meet our operational effectiveness requirements?

[Lord Coaker (Lab)]

First, it would be wrong not to acknowledge the service that the noble Lord undertakes on behalf of our nation; perhaps he can pass that on to the other reservists he will be training with at the weekend.

What the noble Lord asks will, again, be subject to the defence investment plan. Reserves are important to this Government. They will be an important part of how we ensure that we have war-fighting readiness in the future, and alongside that they will need the necessary training.

[Baroness Goldie (Con)]

My Lords, the premise of my noble friend Lord Young’s Question could not be simpler: if the money is not there, what will be cut? The Minister’s admirable verbal limbo dancing has not answered that Question, so let me try to help. Can I turn this on its head and invite the Minister to start spelling out what is being funded? For example, in reply to me yesterday, we seemed to make some encouraging headway on training and equipping the Special Boat Service to enable our elite soldiers to board sanctioned, illegally flagged vessels. Could that one get a tick?

[Lord Coaker (Lab)]

I am not going to comment on the operation of Special Forces, and the noble Baroness would not have done that in her previous role, however nicely she was asked. I outlined the money being spent to other noble Lords: we are developing munitions factories and money will be spent on that; there is a defence housing strategy and money will be spent on that; the Typhoon and T26 deals are enabling imports and money to be spent there; we are spending money on the DragonFire laser system; there is a new programme to build drone factories; and we are spending billions of pounds on the nuclear deterrent. All sorts of moneys are being spent.

While we are talking about this, let us also reflect on what our Armed Forces have done in the last few months, notwithstanding that this debate is about budget. We have seen RAF Typhoons take action in Syria, the carrier strike group, a commitment to the coalition of the willing, forces in Estonia and elsewhere, and support for the American action to deal with the shadow fleet. I know that the noble Baroness supports all of those. I understand the point of the Question from the noble Lord, Lord Young, but we should also reflect on what we do and the challenges this country faces.