War Bonds: £20bn Defence Plan by Lib Dems 🛡️

The Liberal Democrats are proposing the government issue “war bonds” to raise up to £20 billion to strengthen the military, mirroring schemes used during the World Wars.

Liberal Democrat Proposal for War Bonds

Under the plan, the public could loan money to the government through bonds with a two-to-three year term, offering interest rates comparable to standard government bonds. Liberal Democrat leader Sir Ed Davey stated the bonds would “give ordinary people the opportunity to contribute to Britain’s security.”

The proposal comes as calls to increase defence spending have grown, particularly following Russia’s invasion of Ukraine in 2022 and criticism from former U.S. President Donald Trump regarding NATO funding. The Labour government has pledged to increase defence spending to 2.5% of national income by 2027, and 3.5% by 2035.

However, reports in the Times and the Sun suggest that fully preparing Britain’s armed forces will require an additional £28 billion beyond current allocations.

The government’s defence investment plan, originally scheduled for release last autumn, has reportedly been delayed due to cost concerns. Earlier this month, the head of the Armed Forces, Sir Richard Knighton, acknowledged the UK is “not as ready as we need to be for the kind of full-scale conflict we might face.”

Davey emphasized the need to strengthen defences in light of current global threats, stating, “Now is the moment to be clear-eyed about the threats facing Britain – Vladimir Putin is waging war in Europe while Donald Trump is tearing up the rules and alliances that keep us safe.” He added that investing in deterrence is preferable to engaging in war.

The Liberal Democrats propose that funds raised through the bonds would be specifically allocated to defence and would contribute to economic growth and increased government revenue, partially offsetting debt servicing costs. The party also called for an overhaul of the Ministry of Defence’s procurement process, which has faced criticism for being wasteful.

The proposed bond scheme would function similarly to those used during World War I and World War II, allowing citizens to lend money to the government with repayment and interest over six to ten years. By the end of 1945, these schemes had raised £1.754m, promoted by slogans like “lend to defend” and “feed the guns with war bonds”.

Dan Coatsworth, head of markets at investors AJ Bell, noted that while war bonds are a proven fundraising method, they can create long-term debt. He also suggested the public may demand higher interest rates than available elsewhere to participate, and that investment decisions will vary based on individual priorities.