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The Liberal Democrats have urged the government to introduce a “war bonds” scheme, which they estimate could generate as much as £20 billion to strengthen the UK military. This initiative would allow members of the public to lend money to the government through bonds that would last between two and three years, offering interest rates comparable to those on regular government bonds. According to Liberal Democrat leader Sir Ed Davey, such bonds would provide “ordinary people the opportunity to contribute to Britain’s security.” A government spokesperson responded by noting that while “new debt instruments” are regularly reviewed, any new measures must ensure “value for money” and align with broader fiscal goals.
Increases in defence spending have gained urgency in recent times, largely due to Russia’s 2022 full-scale invasion of Ukraine and pressure from figures like former US President Donald Trump, who has criticized NATO countries for insufficient military expenditure. The current Labour administration has committed to raising defence spending from 2.3% to 2.5% of the national income by 2027, which equates to an extra £6 billion annually. Furthermore, the government plans to reach 3.5% spending by 2035, fulfilling a NATO pledge made last year. Nevertheless, reports from The Times and The Sun suggest that making the UK’s armed forces fully prepared for war could require an additional £28 billion beyond existing allocations. The long-awaited defence investment plan, initially set for release last autumn, appears to have been postponed, possibly due to cost concerns. In recent comments, the head of the Armed Forces, Sir Richard Knighton, acknowledged that the UK is “not as ready as we need to be for the kind of full-scale conflict we might face.”
Presenting the proposal for war bonds, Sir Ed Davey emphasized the importance of recognizing contemporary threats, including Vladimir Putin’s ongoing war in Europe and Donald Trump’s disruption of international agreements that safeguard security. He stressed that Britain and its allies “must rapidly strengthen our defences to deter the likes of Putin” and argued it is safer to “invest now in deterring a war than having to fight one.” The funds raised through the bond scheme would be strictly allocated to defence expenditure. David explained that the investment would promote “growth, jobs and higher revenues,” which could help offset some costs associated with the increased debt. Additionally, the Liberal Democrats emphasized the necessity of reforming the Ministry of Defence’s procurement system, acknowledging its history of inefficiency and waste.
The proposed bond program would mirror similar schemes deployed during both World Wars. Citizens would be invited to lend money to the government for a term of six to ten years, with interest paid back at maturity. During World War Two, this approach succeeded in raising £1.754 million, supported by wartime campaigns featuring slogans such as “lend to defend” and “feed the guns with war bonds.” Dan Coatsworth, head of markets at AJ Bell, noted that while war bonds have historically been an effective method for financing national defence, they can also impose a long-term debt burden on governments. He explained that “in theory, the public might demand a better rate of interest than they could get on cash in the bank,” and that some investors might simply treat the bonds as standard financial products, rather than patriotic contributions
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