Britain turns down Canada's defence bank and backs its own scheme
Chancellor to pledge £400 million for joint procurement in Wednesday's Budget, one alliance will now rearm through two separate banks
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Britain has decided against joining Canada's defence bank and will back its own financing scheme instead, it was announced on Sunday. Chancellor John Healey is expected to commit an initial £400 million to the Multilateral Defence Mechanism in Wednesday's Budget, ending talks that began when Prime Minister Andy Burnham discussed the Ottawa-based project with his Canadian counterpart Mark Carney last month.
The Canadian-led Defence, Security and Resilience Bank, modelled on the World Bank, was designed to provide long-term, low-cost financing to help NATO members find an estimated €850 billion a year in additional defence spending. Britain wanted joint purchasing of military equipment at the centre of an institution carrying a AAA credit rating; joint purchasing is not a major component of the Canadian plan. A British official described the parting as mutual: Ottawa is focused on lending to smaller countries individually and wishes to protect its headquarters, while European members, who would have made up the majority of the Canadian bank, resisted a joint headquarters. The two finance ministries concluded it was best to build "two distinct but complementary institutions that operate in partnership."
The backdrop is domestic. Britain's defence investment programme carries a £4.7 billion gap after the Treasury declined to provide upfront funding for the equipment plan. Healey, then defence secretary, resigned in June over chancellor Rachel Reeves's refusal to commit money to raising defence spending to 3 percent of GDP by 2030, a goal he called essential. Now chancellor, he has promised to fully fund the programme, with the extra money to be assigned at a spending review next year.
A European defence figure told the Financial Times that Britain's model, by linking defence financing to joint procurement, undermines national sovereignty. The Netherlands, Poland and Finland have signed up anyway.
NATO's members are meant to find an estimated €850 billion more each year. They will now look for it through two banks.