Burnham is set to U-turn on this key Reeves decision – here’s what it means

Andy Burnham’s Government is preparing to reverse a decision taken by Rachel Reeves, reopening Britain’s bid to join an international bank designed to help fund defence spending. Chancellor John Healey is reportedly in discussions with Canada about UK membership of the Defence, Security and Resilience Bank (DSRB), months after Reeves rejected the idea when she was in No 11. The move comes as Healey searches for ways to close a widening gap in the defence spending ahead of the Budget next month. Shorts What is the bank? The DSRB would work much like an international development bank such as the World Bank, but focused on defence. Member countries pay in money upfront, which the bank uses as a financial guarantee to borrow cheaply on the markets, then lends that money on to governments and defence companies to pay for military projects. The idea is that governments can raise money for rearmament without borrowing themselves directly, and defence firms – particularly smaller ones – can get loans at lower interest rates than they might otherwise be offered. The advantage for the Chancellor is that this would allow for an increase in defence spending without breaking his fiscal rules on paying down debt. The increased debt, and the upfront cost were among the reasons Rachel Reeves was cool on the bank. The bank has been seeking to raise around €100bn (roughly £86bn) in total lending capacity, according to The Guardian. It has been reported that the UK has been formally invited by Canada to become a founding member, alongside countries including Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine. Canada remains the only G7 economy to have formally backed the bank so far. What would it pay for? In broad terms, the money could go towards areas such as boosting weapons and equipment production, strengthening air and missile defences, and expanding what a Government spokesperson has called Britain’s wider “defence industrial capacity”. The i Paper reported that supporters of UK membership argue the upfront cost of around £870m over three years, should be treated as an investment – similar to the Government’s stakes in bodies such as the National Wealth Fund or the British Business Bank – rather than as day-to-day spending, meaning it could sit outside the fiscal rules. The Business Development Bank of Canada (BDC), which is leading the project, has been pushing Britain to join. Its president and chief executive, Isabelle Hudon, said: “The UK should not only be a member of DSRB, but a founding member.” John Healey, the new Chancellor, resigned as defence secretary under Sir Keir Starmer earlier this year amid a long-running row over military spending (Photo: Leon Neal/Getty) Why did Reeves reject it? As Chancellor, Reeves resisted joining the DSRB. In September 2025, the Treasury said the plans were “not backed by the UK government”, and that those putting them forward did not represent the Government or any of its ministers. Reports suggest Reeves was concerned the bank would not address the UK’s defence procurement problems, and was more focused on lending to smaller defence firms in countries with lower credit ratings than Britain’s. These credit ratings, set by agencies such as S&P Global Ratings, reflect how risky it is seen to lend to a country, and determine how cheaply that country can borrow on international markets. The UK has held an AA credit rating, one of the highest tiers, since 2016, meaning it can typically borrow more cheaply on its own than some smaller states could. The i Paper reported that Reeves was also unwilling to commit the estimated £870m upfront cost of UK membership over three years, having ruled out extra borrowing for defence. Instead, earlier this year the UK joined the Netherlands and Finland in proposing a rival scheme, the Multilateral Defence Mechanism (MDM), aimed at strengthening collective deterrence through joint procurement. Poland has since also signed up. Britain has committed an initial £600m to the MDM, which Reeves has said could save the UK as much as 20 per cent on procurement costs. Speaking at a Nato summit in Ankara in July, Reeves said she hoped the DSRB and the MDM would eventually merge. “My preference would be to create one new institution that fulfils a number of purposes,” she said, adding that for now the two schemes would remain “complementary.” Why it could help Healey avoid a Budget headache Healey resigned as Sir Keir Starmer’s defence secretary in June, accusing then-prime minister and Reeves of leaving the country’s security at risk after the defence investment package fell short of what he argued was needed. In his resignation letter, he pointed to “credible ways” of raising extra money, including “working multinationally” – a reference widely read as pointing to the DSRB. His resignation was widely seen as the final straw that led to Starmer’s resignation – heaping pressure on Healey as a result to now deliver on defence spending. As defence secretary, Healey privately pushed for the UK to join the bank, despite resistance from the Treasury, The i Paper has reported. Now that he holds the Treasury brief himself, Healey is expected to avoid setting a firm date for reaching the 3 per cent of GDP defence spending target in October’s Budget, instead setting out a pathway towards the goal at next year’s spending review. Joining the DSRB, alongside the existing MDM commitment, would give Healey another route to funding rearmament without relying solely on tax rises or spending cuts elsewhere. A Government spokesperson said: “We are fully committed to working alongside our international partners to scale defence industrial capacity. “We are working closely with our Canadian allies on ensuring the Multilateral Defence Mechanism and Defence Security Resilience Bank are complementary.”