Chancellor John Healey will announce billions of pounds of new defence spending in Wednesday's Budget, according to The Times. The report says he will also put more money into the National Wealth Fund and the British Business Bank, two large government investment funds, with some of that funding then invested in British defence companies.

Where the money would go

Drone manufacturers and military technology companies are due to benefit, the report says, funded by long-term borrowing rather than spending cuts. Because the money is framed as investment that should bring returns, the report says it would not count against the Treasury's fiscal rules, a claim that is likely to be scrutinised by Labour's political opponents. The spending would raise the share of national income spent on defence, since such investments count towards NATO's official target. Details for future defence budgets are expected to be set out next year in the government spending review.

The 3 per cent argument

Healey has been under pressure to increase military funding since resigning as defence secretary in June, when he warned that underfunding made Britain less safe. He had called for defence spending to reach 3 per cent of GDP by 2030, up from 2.7 per cent now, and the new spending is intended as a downpayment on that ambition. The United Kingdom has signed up to the new NATO target of 3.5 per cent by 2035. Shadow chancellor Andrew Griffith has said Healey must resign if he does not fully fund 3 per cent in the Budget. None of this is confirmed until the Budget is delivered, and the figures reported remain pre-Budget reporting.

Sources: The Times, Sky News via Great Yorkshire Radio