A significant funding gap of potentially £5bn for the UK's defence could pose a challenge for future government budgets, with attention turning to how this shortfall will be addressed. The Defence Investment Plan (DIP) outlines a £15bn increase in military spending over the next four years, a move Prime Minister Sir Keir Starmer has lauded as historic.

However, the Treasury has indicated that savings identified from other government departments will not fully cover the increased defence expenditure. This has led to concerns about a "black hole" in defence funding, which could fall to be managed by Labour leader Andy Burnham, should he assume leadership of the country.

BBC Verify's analysis of Treasury figures shows that defence spending is set to rise by an average of £3.75bn annually over the four years to 2029-30, compared to previous projections. The cumulative increase over this period totals £15bn. Yet, approximately £1.2bn of this annual rise still needs to be financed, with details expected in an upcoming Budget.

When these annual shortfalls are aggregated over four years, the figure approaches £4.7bn. However, public finance experts suggest that focusing on the annual shortfall of around £1.2bn provides a clearer picture. This annual gap will need to be covered in the next Budget through spending cuts, tax increases, or additional borrowing.

While £1.2bn represents a small fraction of total projected Whitehall departmental spending (£678bn in 2026/27) and tax revenues (£1,170bn in 2026/27), it is a notable sum in the context of fiscal headroom. Chancellor Rachel Reeves' fiscal rule, aiming to balance day-to-day spending with tax revenues, had around £24bn of leeway against this goal in the 2026 Spring Statement, meaning the defence funding gap accounts for approximately 5% of this buffer.

Experts like Ruth Curtice of the Resolution Foundation have noted that a £1.2bn annual budget gap is a relatively large figure, especially when compared to the total value of tax and spending measures in Budgets a decade ago, which sometimes amounted to only £2bn annually in cash terms.

The funding gap also needs to be considered alongside other fiscal decisions. For instance, past decisions by chancellors to freeze fuel duty instead of increasing it in line with inflation have also impacted public finance forecasts, sometimes by significant amounts over time.

The implications for future budgets are significant, as the government must find a way to finance this defence spending increase without jeopardizing its fiscal targets or overall economic stability. The upcoming Budget will be crucial in determining how this challenge is met.