The Chancellor has set a target date of 2030 for defence spending to reach three per cent of gross domestic product, and will set out at next year’s spending review how Britain meets its NATO commitment of three and a half per cent by 2035, according to the Budget statement.

John Healey, who held the defence portfolio before moving to the Treasury, told the Commons: “At the spending review next year, I confirm that I will set out the details of how we will meet our NATO commitment to spend 3.5% of GDP on defence by 2035, with a target date for 3% in 2030.”

On how it will be paid for, he said: “Today, I am getting work underway to get there in a fiscally sustainable way, that will include looking hard at public spending, as I have done today, to fund the defence investment plan. But I am also determined to use more innovative financing alongside the private sector and our international allies.”

A new innovative defence finance task force will lead the work ahead of the spending review, the first of four measures announced. Treaty negotiations will begin on a multilateral defence mechanism, which Healey also called a bank, with Finland, Poland and the Netherlands, intended to boost defence investment and joint procurement across NATO allies. The government will seek the maximum private investment into the defence industrial base, including through public-private partnerships. And the National Wealth Fund and the British Business Bank will launch a new focus on defence, dual-use technology and sovereign capability, deploying up to £5 billion of investment and lending over the next four years.

Healey said: “I will ensure this record defence investment works twice: once for our national security, and once for British jobs and British business. Places across all four nations: Barrow, Rosyth, Aldershot, Plymouth, Glascoed, and Belfast, reindustrialised and transformed.”

On Ukraine, the Chancellor said he and the Prime Minister had called President Zelensky that morning to tell him what the Budget contained, and that the response was “you’ve made my day”. The package is £10 billion of additional economic and military support based on loans and export finance guarantees, together with urgent military funding for this winter.

Healey said: “The whole house, the whole country, is united for Ukraine, and today we send a clear message to Moscow: Britain will stand with Ukraine for as long as it takes.”

The Chancellor made the case personally, drawing on his own family: “I say this as Chancellor. I say this as former Defence Secretary. And I say this as a dad whose son is an army reservist, a reservist that came back four years ago from early training to say they had no kit and they had no bullets to fire. That’s the truth.”

He said that for fourteen years Conservative governments had hollowed out and underfunded the armed forces, and that the defence budget this year is £14 billion higher than in the final year of the last government, which he described as the biggest increase in defence spending since the end of the Cold War.

Britain signed up at the NATO summit in The Hague to three and a half per cent of gross domestic product on core defence by 2035, with a further one and a half per cent on defence-related resilience and infrastructure making up the alliance’s headline five per cent. Ministers had previously described three per cent as an ambition for the next Parliament, and attaching a target date of 2030 to it is firmer than the language used before.

Industry witnesses told the Defence Committee this month that the Defence Investment Plan is not investable as it stands, that most defence technology firms report a declining market, and that the department’s small business office has four staff. The finance task force and the £5 billion through the National Wealth Fund and British Business Bank are the Treasury’s answer to that.