The Chancellor's new boss will have his work cut out for him as Prime Minister Andy Burnham faces a daunting defence spending challenge. John Healey's appointment to the Treasury has brought with it a clear and uncompromising message: defence expenditure must rise to three per cent of GDP by 2030, injecting an additional £9bn into national security annually.
Burnham was "very aware" of Healey's advocacy for this increase when he appointed him, but the Prime Minister has stopped short of committing to it in its entirety. In a BBC interview, Burnham described his commitment to fully funding Sir Keir Starmer's Defence Investment Plan (DIP) as his "first challenge", though he declined to make an explicit pledge regarding Healey's specific target.
Healey's appointment comes after his resignation from the previous government, where he served as Defence Secretary. His departure was reportedly prompted by his inability to secure further funding for the DIP, with Healey criticising both Starmer and former Chancellor Rachel Reeves for being "unwilling" and "unable" to provide the military with a substantial cash injection.
The fiscal backdrop for Healey's upcoming Budget is treacherous. Burnham has inherited a series of substantial financial obligations from the previous administration, including a doctors' pay settlement and a £4.7bn shortfall in DIP funding over four years. Adding to these pressures are Burnham's own bold pledges, such as energy price cuts and ending rough sleeping.
Meanwhile, speculation points towards radical announcements from Burnham in the coming days, particularly concerning devolution and social care. Reports suggest that mayors could be granted additional revenue streams from income taxes for local investment, though this is not expected to extend to new devolved tax powers beyond existing overnight stay levies.