Davey on DIP: Defence bonds could raise £20bn but Starmer has 'put his fingers in his ears'

Responding to Keir Starmer's speech on the Defence Investment Plan today, Liberal Democrat Leader Ed Davey said:

"Keir Starmer has taken the political choice to leave our military heroes in mouldy homes and barracks, to undermine our security, and to put jobs and business investment at risk across the country. Defence chiefs have been forced into hard choices, instead of being given what they need.

"This was the Conservatives' legacy, and now it is Keir Starmer's.

"The Liberal Democrats' plans for defence bonds would raise £20 billion for investment in our Armed Forces, but Starmer has once again put his fingers in his ears. Andy Burnham needs to go much further and take up our plans to repair the damage done, keep our country safe, and allow the UK to meet its NATO commitments."

ENDS

Notes to Editors

Liberal Democrat proposal for a Defence Bonds Programme

This would be a fixed-term issuance, legally hypothecated to capital spending on defence. Under our proposals, the issuance would be capped at £20 billion and run over the next two years to urgently build up our defence capabilities.

This package would also send a strong UK demand signal to drive more defence-related investment - helping to deliver growth, jobs and additional revenues for the Exchequer.

The Defence Bond programme would need to be accompanied by the establishment of a new Defence Public Accounts Committee to provide regular scrutiny of defence spending - including the use of funds raised by the Defence Bonds programme.

There is recent precedent for UK governments using sector-specific bond programmes to raise funding for capital investment. The previous government issued its first green gilt in September 2021. The proceeds from the gilt are being spent on projects with an environmental benefit. £10 billion was raised from the sale of the first green gilts issuance. [Link to Government Press Release on first sale of Green Gilts', 2021].

There is recent European precedent for the use of Defence Bonds to raise spending for security. This includes, for example, Poland's Armed Forces Support Fund - established in 2022 to support the modernisation of Poland's military and managed by the state-owned National Development Bank, with the main source of funds coming from issuing bonds. [Link to Politico article outlining Poland's debt financing for defence model].