Rows over defence investment plan ‘have badly harmed cabinet relations’

Cabinet relations have been left badly damaged by the protracted row over the defence investment plan (Dip), according to Whitehall sources who say the standoff has led to some of the worst infighting since Labour took power.Ministers are putting the final touches on the plan, which is expected to be published in the coming weeks after departments agreed to cut their capital budgets by about 1% to pay for additional military spending.Allies say Keir Starmer wants the plan to form part of his legacy should he be replaced as prime minister by the Greater Manchester mayor, Andy Burnham, in the coming weeks.But the months-long dispute between the Ministry of Defence, the Treasury and No 10 has left senior members of the government trading accusations about each other, insiders say.“The whole process has been a mess,” said one Whitehall official. “First the Ministry of Defence told everyone their plans were fully costed and didn’t need extra cash.“They infuriated people by then coming back and asking for billions more, but then the Treasury absolutely refused to budge, dragging this out for much longer than they should have.”Starmer’s spokesperson said on Monday: “The prime minister is determined to get the Dip right to ensure we deliver the best equipment and technology into the hands of our frontline forces, whilst investing in and growing the UK economy.”He agreed last February to increase defence spending to 2.5% of gross domestic product in the belief that it would be enough to fund the promises made in the strategic defence review, which was being worked on at the time.That review was published in June to coincide with the cross-government spending review, which confirmed nearly £20bn extra for the MoD over five years. Within months, however, defence officials said they would need another £28bn over the next four years to pay for the commitments in the defence review.“The MoD conducted a defence review at the same time as the Treasury was doing its spending review specifically to avoid this scenario,” said one government source.Another said: “The MoD has a terrible record in keeping its costs down so it is galling to be asked for more money just months after the defence review.”The defence secretary, John Healey, ended up requesting about £18bn from the Treasury, but Rachel Reeves refused to sign off on anything above £12bn for weeks.In the end Starmer put heavy pressure on the chancellor to agree additional spending of about £15bn, funded in part by other departments cutting their capital budgets by about 1%.The energy and transport departments have agreed bigger cuts because their capital budgets are relatively high.Sources say, however, that the transport secretary, Heidi Alexander, successfully lobbied Reeves not to make savings that would have reduced spending on new buses and trains and potentially even HS2.The Treasury will take control of a multibillion-pound fighter jet programme in return for agreeing the funding, but the chancellor is understood to be frustrated about having had to cut projects which would promote growth to pay for promises she believed were fully costed.Healey’s allies say he was forced to ask for more money because of escalating global conflicts, which led to greater demands on his department’s budget. They say Starmer’s commitments to the “coalition of the willing” in Ukraine and a possible mission in the strait of Hormuz, for example, have pushed up their costs.An MoD spokesperson said: “The defence investment plan will deliver the best equipment and technology into the hands of our frontline forces at speed, while investing in and growing the UK economy.”Senior government officials say they are closer than ever to signing off on the long-delayed Dip, which the prime minister has promised to announce before a Nato summit early next month.