There is no money: How the Defence Investment Plan impacts Burnham’s policy programme

The Government has committed £15 billion to put the Ministry of Defence on a more sustainable footing amid growing global uncertainty. A significant portion of this funding has been drawn from departmental capital budgets – the pot allocated for long-term investment in areas like hospitals, schools, and major infrastructure projects.

Reallocating funding in times of crisis is not without precedent. An additional £63 billion was directed to the NHS in 2021 in response to the COVID-19 pandemic. And with defence now consistently ranking among the top three voter concerns, there is clearly political recognition that increased military spending is both necessary and unavoidable.

Nevertheless, cutting capital budgets across the board will inevitably dent the Government’s ability to deliver tangible improvements to public services. Infrastructure projects are one of the clearest signs that a government is delivering; a new hospital building or a refurbished pier demonstrates visible local change that can often shape voting intention more than policy reforms.

But ultimately, while the DIP has been published by Starmer, the implications of its required budget reallocation will likely be felt head-on by Burnham. If he – as expected – becomes Prime Minister at the end of July, he will come face to face with the extent of these significant cuts.

Capital budgets across all departments will be reduced by 1% per year, with deeper impacts felt in energy and transport. Crucially, the plan’s funding parameters also stipulate that a further £4.7 billion must be found at the Autumn Budget – a task likely to fall to Burnham’s eventual Chancellor.

The impacts of these budgetary pressures will curb departmental ambitions right across Whitehall.

Take the health service, for example. Burnham will have to find a way to continue delivering the New Hospitals Programme and the National Cancer Plan with significantly reduced funding for the infrastructure that underpins them, such as hospital estates and MRI scanners.

Then there is the Department for Transport, which is being asked to cut an additional £700 million from the budget for road infrastructure schemes. Road upgrades may be one of the less glamorous forms of long-term investment, but try telling that to voters in Derby, who have yet again been denied improvements to the A38 – a scheme first proposed in 2001.

Burnham must now deliver long-term change without the ability to make long-term investments.
For organisations looking to engage with his government, that requires an important consideration. Policy proposals that rely on capital spending are likely to face a tougher reception than they might have done a few months ago. Instead, the strongest propositions will be those that can deliver impact by unpicking inefficiencies or leverage private investment – something Burnham has relied on in his time as Greater Manchester Mayor.

There is also a point on timing. With £4.7 billion needing to be found at the Autumn Budget, departments are likely to be cautious about committing to new spending commitments before then. So, while Burnham may arrive in No.10 at the end of July, Whitehall may well be ‘on pause’ for a while yet.

The biggest impact of this, however, will be to Burnham’s brand. He will want to enter government focused on improving optics and will be keen to move away from the “tough choices” rhetoric that has defined Starmer’s premiership. Instead, he’ll have to deliver within a fiscal landscape as complex as the one that Starmer inherited – at a time when Labour needs to have a relentless focus on bringing about change quickly.