Andy Burnham, poised to become UK prime minister within weeks, is entertaining a proposal to issue war bonds to fund the defence budget. The idea, dismissed by outgoing PM Keir Starmer as “just another form of borrowing,” has gained traction among senior City advisers, including former BoE chief economist Andy Haldane. Proponents argue the instrument could tap £70 billion ISA savings and could reshape public financing.

Supporters estimate war bonds could raise £20 billion for the armed forces, with tax‑free status on inheritance and capital gains making them attractive to older savers. Nicholas Lyons of Standard Life predicts at least £10 billion in the first year, over the next decade, while economists suggest a 0.5‑percentage‑point lower yield than regular gilts would still draw strong retail demand significantly.

Labour’s defence secretary resignation and a pending NATO‑summit investment plan have left the Treasury hunting fresh financing. If Burnham adopts the bond scheme, the move would sidestep higher taxes but cut future inheritance‑tax receipts, forcing the government to balance fiscal rules with a growing security bill. The proposal now sits at the centre of Downing Street lobbying.