Rachel Reeves is resisting calls for a major defence spending boost.
The Chancellor is defying military chiefs who are demanding a hefty increase in Ministry of Defence spending.
The department wants to increase its budget amid fears of a £28billion funding shortfall.
Talks over the defence budget have now hit a roadblock, the Telegraph reports, despite service chiefs warning that existing plans will not be enough to meet Britain’s spending commitments over the next four years.
It was reported this week that Downing Street wants to turbocharge its defence spend in the coming years, hitting three per cent by 2029, a claim sources later insisted was misinterpreted.
Defence officials are concerned about the possibility of a conflict with Russia in the coming years and feel rapid rearmament is crucial.
Rachel Reeves is resisting calls for a dramatic boost in defence spend
|PA
Spending too much on procurement and inflation are key reasons as to why the MoD is facing a financial black hole of tens of billions of pounds, the department has argued.
Air Chief Marshal Sir Richard Knighton, chief of defence staff, is believed to have told the Prime Minister before Christmas about the shortfall.
The publication of the Defence Investment Plan (DIP) has been delayed as a result of the discussions, meaning Britain’s plans for how it will equip its military over the next decade remain unclear.
The Treasury is concerned about the MoD’s spending and its refusal to increase its budget beyond the settlement of £73.5billion a year by 2028-29.
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Giving more money to defence could also mean Ms Reeves will have to carry out another tax raid in next year’s Budget.
According to the European Defence Agency, Britain currently commits 2.3 per cent of its share of GDP on military expenditure.
In terms of its share of Government spending, it stands at 5.3 per cent.
On Saturday, Sir Keir told Nato allies at a Munich summit that he wanted to ramp up the rearmament of Europe.
Keir Starmer is under pressure to ramp up military spend
| PAHe argued: “To meet the wider threat, it’s clear that we are going to have to spend more, faster.”
No10 later denied reports that the Government was set to increase defence spending to three per cent of GDP before the end of the current parliament.
A government spokesman said: “The Government is focussed on delivering for defence.
“As demands for defence increase, we are delivering the largest sustained increase in defence spending since the Cold War, with an extra £5billion for defence this year alone.”