Keir Starmer’s premiership has been pushed to the brink of collapse after the shock resignation of John Healey as defence secretary undermined his security credentials and risked shredding his remaining political authority.

In a blistering resignation letter, Healey accused Starmer and his chancellor, Rachel Reeves, of putting the country’s security at risk, saying the long-awaited defence investment plan (Dip) fell well short of what was required.

“You have been unable and the Treasury has been unwilling to commit the resources that the nation needs to defend the country at this time of rising threats,” he wrote.

“I would not be able to accept a Dip settlement that does not give our forces the resources they need. I am now left with no other option than to submit my resignation as your defence secretary.”

Dan Jarvis, the security minister, was named as Healey’s successor on Thursday evening.

The armed forces minister, Al Carns, and Healey’s two parliamentary aides also resigned on Thursday. In his resignation letter, Carns said: “We need a new way of governing and we need it now.”

The upheaval has left Starmer struggling to shore up his reputation as a safe pair of hands at a time of growing international threats.

It comes days before Starmer is due to meet G7 allies in France and weeks before a Nato summit in Ankara that will be attended by Donald Trump, leaving the prime minister facing the embarrassing prospect of explaining why his own defence secretary felt he was not doing enough to keep his country safe.

Many Labour MPs, including cabinet ministers, already feel that Starmer is on borrowed time with the potential return of Andy Burnham after the Makerfield byelection next week. “This just makes the end more certain,” one minister told the Guardian.

Healey’s decision appeared to have taken No 10 by surprise despite a protracted row over defence spending, during which he had called on ministers to consider “creative funding” mechanisms like those adopted by other European countries, based on more borrowing.

Starmer insisted the Dip would be funded properly and told Healey it had already required significant reallocations from other Whitehall budgets. “Strong public finances are part of what keeps us safe – irresponsible borrowing only puts that at risk,” he said in his response to Healey.

In his letter, Healey revealed that the government was planning to raise defence spending by just 0.08 of a percentage point of GDP between next year and 2030 – from 2.6% to 2.68% – and argued that it must hit 3% in 2030 to meet the challenge.

Echoing the military chiefs over the risks faced by the UK, he highlighted Starmer’s explicit warning last week that UK intelligence had said there could be an attack by Russia on a Nato country as early as 2030.

“Without a Dip that meets the moment in this way, I am being forced to make decisions that would reduce the readiness of our forces and increase the risk to personnel on operations, and could make the country less safe,” Healey said.

The government has committed to increase spending to 3.5% of GDP by 2035 in line with a Nato target, while it has also set out an ambition to raise funding to 3% in the next parliament. The Dip had been scheduled for publication on Thursday.

Richard Barrons, a retired general who was one of three independent authors of last year’s strategic defence review, said the exercise had concluded that the UK now faced a more dangerous world and the armed forces and wider society “are in poor shape to deal with that reality”.

He said the government’s decision not to fully fund its own review “diminishes the UK’s standing within Nato, weakens our credibility with allies and increases our vulnerability to the realities of 21st-century conflict”.

The former chief of the defence staff Gen Nick Carter said: “We now live in very dangerous times. The threat is clear and present and that requires us, I am afraid, to spend more money than we have spent in the past.”

He told the BBC: “We’ve always, from a British perspective, been able to play the card of punching above our weight when it comes to defence, and it’s very difficult for us to do that now.

“In terms of the timing, it couldn’t be more terrible, what with the G7 next week and a Nato summit in Ankara in early July that President Trump said he was going to come to personally.”

Cabinet relations have been badly damaged by the months-long row over the Dip, with the standoff leading to some of the worst infighting since Labour took power. Several departments had agreed to cut their capital budgets by about 1% to pay for additional military spending.

While he was widely regarded as a loyalist, Healey was one of several cabinet ministers who privately urged Starmer last month to consider his position and do what was right for the country and the party. Although previously touted as a potential leadership candidate, his allies ruled this out on Thursday.

Before his resignation, Carns described the Dip as not fit for purpose and called on Starmer to think again.

Rich Knighton, the head of the armed forces, wrote to military personnel on Thursday evening saying he looked forward to “welcoming our new defence secretary when they are announced”.

He told members of the armed forces to “remain apolitical” and not be drawn into speculation about funding decisions “that are for ministers to make”.

The government published its strategic defence review last June to coincide with the cross-government spending review, which confirmed nearly £20bn extra for the MoD over five years. Within months, defence officials said they would need another £28bn over the next four years.

Healey ended up requesting about £18bn from the Treasury but Reeves refused for weeks to sign off on anything above £12bn. In the end, Starmer put heavy pressure on her to agree to additional spending of about £13.5bn, although MoD sources said only about £10bn was new money.

This was to be funded in part by other departments cutting their capital budgets by about 1%, with energy and transport targeted because of high capital budgets.

The Dip is intended to be a fully costed review of the military’s major capital projects, which form more than 40% of its total budget, and core future capabilities, including spending on next-generation Dreadnought nuclear submarines, as well as investment in drones to counter a possible Russian invasion of eastern Europe.

Costs have soared in the past because of a succession of political promises made by the Tories and Labour as well as poor financial management by the MoD. On Sunday, the Commons public accounts committee, which scrutinises government spending, warned that the department had gone years without a credible plan for military capability.

Starmer has made a succession of military commitments, promising to send peacekeepers to Ukraine if a ceasefire to halt the Russian invasion can be agreed, and to help police the strait of Hormuz if the war between the US and Iran ends.