Healey to discuss defence with G20 counterparts in first meeting as Chancellor

John Healey will discuss defence spending with G20 counterparts and put “good growth for all” at the heart of his message during his first meeting of global finance ministers.

The new Chancellor will avoid setting a target date for reaching 3% defence spending in the upcoming autumn Budget and is expected instead to set out a pathway to reaching the goal at the 2027 spending review.

But officials said there would be discussions on defence finance with counterparts in Asheville, North Carolina, with Mr Healey long having been a proponent of multilateral funding mechanisms.

The UK had been looking at setting up such a mechanism with the Netherlands, Finland and Poland, with hopes of merging it with another – the Canada-led defence, security and resilience bank (DSRB).

At Sir Keir Starmer’s final Nato summit as Prime Minister last month, he and Canadian prime minister Mark Carney agreed that their countries would “co-operate closely” on defence funding mechanisms but stopped short of committing to a merger.

Mr Healey will hold meetings with Canadian finance minister Francois-Philippe Champagne, US Treasury Secretary Scott Bessent and managing director of the IMF Kristalina Georgieva, among others.

The Chancellor is expected to say: “Good growth for all rests on fiscal discipline.”

The fiscal squeeze facing the new Chancellor ahead of his inaugural Budget has been laid bare after official figures showed government borrowing unexpectedly rose to £1.8 billion last month.

The Office for National Statistics (ONS) said government borrowing stood at £1.8 billion in July, £700 million or 68.7% higher than a year ago and confounding expectations.

The hike came despite a record July for income tax receipts.

Inflation also surged to a four-month high of 2.9% in July amid the fallout from the Iran war.

Experts, including the National Institute of Economic and Social Research (Niesr), have warned Mr Healey that he will need to either raise taxes or cut spending elsewhere as pressure on the public finances has left no room for extra borrowing.

The Chancellor has told the Cabinet they must be prepared to make cuts to finance some of the new pledges, and promised his economic plans would be “built on fiscal discipline” and meet the fiscal rules set by his predecessor Rachel Reeves.