Rachel Reeves has warned that Britons could be hit with higher taxes to pay for defence spending.
The Chancellor suggested that further tax rises could come in the autumn budget because "borrowing can’t be the only answer".
Ms Reeves told an investor conference: "The money has to come from somewhere. Everyone can see the challenges. We are spending 2.6 per cent of GDP [on defence] from next April and the pressures are only going in one direction."
Sir Keir Starmer is poised to approve a £13.5billion increase for the armed forces, in an attempt to reach a 2.5 per cent GDP target, in an announcement expected as soon as Friday.
But Defence Secretary John Healey has warned the figure risks undermining Britain’s credibility in Nato.
Lord Robertson of Port Ellen, the former Nato secretary-general who was the lead author of the Government’s defence review, told the Commons Scottish affairs committee: “The country has to be defended. The threat to our liberty, our freedom, our way of life is no longer theoretical.
“We see vividly every day in reality what is happening in the streets of Ukraine. We are under-prepared, we are under-insured, we are under attack and our country is not safe.
"If we’re going to be safe and we want to have the war-fighting readiness that alone will stop anyone from attacking us, then we need to move and we need to move fast."
Rachel Reeves has warned that Britons could be hit with higher taxes to pay for defence spending
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The £13.5billion figure falls dramatically short of what military leaders initially sought.
Defence chiefs had requested £28billion over the same period.
Ministers determined this sum was simply unaffordable.
The government had previously weighed up committing £18billion before settling on the lower amount.
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The £13.5billion figure falls dramatically short of what military leaders initially sought
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The Defence Secretary has so far declined to approve the Treasury's proposed timeline, which would see Britain reach its 3 per cent GDP defence spending target only by 2034/35, up from the current 2.3 per cent.
These internal government disputes threaten to delay the publication of the comprehensive defence investment plan, potentially until next month.
Downing Street has instructed all departments to trim at least one per cent from their capital spending budgets, which cover infrastructure investment, across the coming four years.
Among the expected casualties are environmental initiatives such as carbon capture and storage schemes, creating fresh tensions with Ed Miliband, the Energy Secretary.
The Treasury is advocating for what it terms a "planning assumption" that would see the three per cent GDP target achieved only in 2034/35.
Sir Keir Starmer is poised to approve a £13.5billion increase for the armed forces
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Mr Healey considers this timeline inadequate given the magnitude of security challenges confronting Britain, and has thus far withheld his endorsement of the approach.
Industry sources indicate the defence blueprint may now be revealed on Friday, a day behind schedule due to departmental wrangling.
Mr Healey is expected to launch a major drone innovation facility in Swindon alongside Armed Forces Minister Al Carns, with numerous defence companies invited to attend.
Mr Healey has adopted a more transformational stance than military chiefs, prioritising autonomous systems and drones over conventional equipment like ships, tanks and fighter jets, according to the Times.
GB News has approached the Treasury for comment.
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