Lib Dems propose £20bn defence boost through public war bonds in bold new funding plan

DCM Editorial Summary: This story has been independently rewritten and summarised for DCM readers to highlight key developments relevant to the region. Original reporting by BBC, click this post to read the original article.

The Liberal Democrats are urging the government to introduce “war bonds,” a plan that would allow you and other members of the public to lend money to support the UK’s defence budget. These bonds, similar to standard government bonds, would run for two to three years and pay the same interest rate. Party leader Sir Ed Davey believes the scheme could raise up to £20 billion and offer ordinary citizens a chance to contribute directly to national security. The government has responded by saying it keeps new debt instruments under review but insists they must provide value for money and align with broader financial goals.

There’s growing pressure to boost defence spending, especially following Russia’s full-scale invasion of Ukraine in 2022 and the election of Donald Trump, who has criticized NATO allies for not investing enough in their military. The Labour government has pledged to increase defence spending from 2.3% to 2.5% of the national income by 2027, which would require an extra £6 billion annually, and to raise it further to 3.5% by 2035. However, recent reports suggest the UK may need an additional £28 billion to fully prepare its armed forces, and a promised defence investment plan has reportedly been delayed due to cost concerns.

Highlighting the urgency, Armed Forces chief Sir Richard Knighton has warned that the UK isn’t adequately prepared for a potential full-scale conflict. Sir Ed Davey emphasized the strategic importance of strengthening defences in the face of global threats, particularly those posed by Vladimir Putin and changing US alliances. He argued that it’s more cost-effective to invest in deterrence now than to face an actual war later.

The Liberal Democrats propose that the funds from the war bonds be exclusively used for defence and suggest that this would also stimulate economic growth, create jobs, and increase government revenues, helping to offset debt servicing costs. They also call for reforms in the Ministry of Defence’s procurement process, which has faced criticism for inefficiency. The proposed bonds echo schemes from World Wars I and II, where citizens lent money to the government with the promise of repayment and interest over time. While war bonds are a tested method, experts caution they could add to long-term national debt and must be attractive enough to encourage public investment.