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Defence boost will create Scottish jobs - Chancellor

PA Media Rachel Reeves smiles wearing a white hard hat and a yellow fluorescent jacket. She has shoulder length brown hair with a fringe. She is speaking to men also in fluorescent jackets and white hard hats who are blurred in the foreground. PA Media
Rachel Reeves visited defence firm Babcock in Rosyth on Friday

The UK government's increased spending on defence will create jobs in Scotland, Rachel Reeves has said.

The Chancellor has unveiled a £2bn increase to a lending scheme that she says could fund overseas deals for armoured vehicles made in Scotland.

On a visit to a defence contractor Babcock in Fife, Reeves said it would create "jobs and prosperity" while keeping the UK safe in an uncertain world.

The defence boost has been funded by a cut in international aid. Reeves said budgets were "not infinite" and it was right to prioritise defence.

The money will be used to increase the lending capacity of UK Export Finance from £8bn to £10bn.

The government agency provides financing to businesses exporting goods and overseas firms buying products from the UK.

The increase comes as the UK government set out plans to increase defence spending from 2.3% to 2.5% of GDP by 2027.

The move was welcomed by the US government but labelled a "betrayal" by development charities.

Sir Keir Starmer said the UK's aid budget would be reduced from 0.5% of gross national income to 0.3% in 2027 to accommodate this.

The Prime Minister told the House of Commons that would mean spending £13.4bn more on defence every year from 2027.

Last year the UK spent £53.9bn on defence.

PA Media Rachel Reeves smiles wearing a white hard hat and a yellow fluorescent jacket. She has shoulder length brown hair with a fringe. She walks towards the camera past building parts.PA Media
Babcock manufactures defence equipment like warships and submarine components at its Rosyth base

At Babcock's dockyard in Rosyth, Reeves told BBC Scotland that it was the government's responsibility to "keep our country safe and secure".

"It is right that we step up defence spending," she said.

"But it's also right that we explain where that money comes from because government budgets aren't infinite.

"We have made the decision to reduce what we spend on international development.

"That is right in the changed circumstances that we face in the world with increased uncertainty and aggression from overseas."

'World has changed'

The Chancellor said UK defence spending already supported 25,000 jobs in Scotland.

She added: "Today we have also announced a £2bn increase for UK export finance to help businesses in the defence sector export overseas.

"So not only can we benefit from increased expenditure on defence in our country, but also take advantage of the opportunities to export what we do overseas, creating more jobs here in Scotland.

"The world has changed and we can see that before our eyes with increasing aggression from Russia and we have to adapt to those circumstances."

Getty Images Kate Forbes sits in the chamber at Holyrood. She has shoulder length dark brown hair and wears a red shirt, blue blazer and black glasses.Getty Images
Kate Forbes said there was a heightened risk to international security

Deputy First Minister Kate Forbes said the Scottish government would "look very carefully" at the Chancellor's proposals.

"In the past we have expressed some concern about the cuts to aid budgets," she told BBC Scotland.

"Aid budgets are often a preventative action - they lead to greater international stability and security because it delivers the basic necessities that communities around the world require.

"It has to be the bedrock of our approach to international stability and security, but clearly the prime minister also has to respond to growing threats.

"I don't think anyone watching the news in the last few weeks would be in any doubt about the heightened risk right now to our international security."

Last month, the US government urged its European allies to increase defence spending to 5% of their GDP.

However, UK Conservative defence spokesman James Cartlidge said Labour's procurement had not reached the needed scale and pace.

"We welcome efforts to fire up the defence industrial base and export is critical," he said.

"However we also need a strong domestic order book and Labour still haven't turned their spending promises into actual procurement at the scale and pace we need."