How much should Britain be investing in defence

As a result of the 2024 Spring Budget, it is expected that defence spending in the United Kingdom (UK) will fall by approximately £2.5 million in the financial year ending March 2025 when compared to the same period last year. With an ongoing war in Europe and expanded British presence in the Indo-Pacific, many agree that Britain’s defence posture needs to be strengthened. But how much should Britain be investing in defence? We asked nine experts in today’s Big Ask.

Ed Arnold, Royal United Services Institute

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NATO’s 2% gross domestic product (GDP) target for defence spending has always been imperfect and enables a lowest common denominator approach to increasing the capabilities of the alliance.

With little true understanding of the difference 2%, 2.5% or even 3% could buy in real terms, such totemic yardsticks become empty and victim to political election sloganeering. Coupled with weak aspirations – such as ‘when fiscal conditions allow’ – these commitments become meaningless. Defence spending should derive from the threat, not fiscal rules, which went out of the window in response to the Covid-19 pandemic. Having fiscal rules in a ‘pre-war world’ as Grant Shapps, the UK Secretary of State for Defence has pronounced is absurd. In 1936, British defence spending was 3.75% of GDP. After mobilising, it peaked at 52% in 1945.

The UK has consistently spent over 2%, including the NATO target of 20% on major new equipment. Yet in the latest National Audit Office assessment there was a £16.9 billion deficit in the equipment budget to 2033. Worse, the UK shows the lowest real terms increase of all NATO members since 2014. With few capabilities left to cut, ambition must be curtailed to make the budget work. Therefore, UK defence spending must significantly rise, but of greater importance, it must also become far more productive. With neither the Prime Minister’s five priorities, nor the Leader of the Opposition’s five missions, concerning defence, it is unlikely that this will be realised in the next Parliament. And by then it may be too late.

Lotje Boswinkel, Centre for Security, Diplomacy and Strategy (Brussels)

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Donald Trump’s recent criticisms against NATO allies ‘who fail to pay their bills’ has once again reinvigorated debates on European defence spending. The UK is one of the few NATO members which have consistently met the alliance’s 2% target since 2014, alongside the United States (US), Greece and Estonia. One may therefore conclude that London has little to worry about.

The opposite is true. If the US were to defend only those allies which spend 2%, the alliance as a whole would still be vulnerable. Trump may also just pull back from NATO no matter how much Europeans spend. Moreover, tensions in Asia will continue to draw US resources away from Europe regardless of the election outcome. As the war against Ukraine rages on, and with a direct NATO-Russia conflict no longer unthinkable, Europeans should prepare to defend themselves with limited or no US support.

This is no easy task. Europeans lack sufficient strategic enablers, long-range fires, missile defence systems, and heavy armoured brigades. Closing Europe’s capability gap requires more cooperation, more integration, and more money. Britain is arguably one of the few allies which can contribute those flagship capabilities and strategic leadership functions to fill potential US gaps. But that would require a significant increase in spending. Although this might be challenging politically, desperate times call for desperate measures.

Robert Clark, CuriaUK

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It has been current government policy in the UK to increase defence spending from around 2.1% of GDP to 2.5%, when the fiscal environment allows. Given this month’s Spring Budget allowed for further tax cuts, there is an argument to be made that now is the fiscal time to raise defence spending by around £9 billion per year in order to meet that 2.5% pledge.

Whilst making the case for a particular % increase is necessary to demonstrate political will and messaging – to both our allies and adversaries alike who are increasingly sceptical of Britain’s hard power capabilities – just as important is the need to studiously consider where any extra resources are to be spent. This requires a capability study, something which critically examines at an important time where British defence capabilities are lagging. 

The nuclear, space, cyber and AI domains have all seen record investments and modest rises in recent years, whilst ammunition and artillery stocks have almost been depleted due to the ongoing war against Ukraine, coupled with systemic underinvestment in Britain since the end of the Cold War.

There are now mounting calls from within government to raise defence spending to at least 2.5% of GDP. This author would argue that this needs to raise to 3% of GDP by the end of this decade if we are to reverse the shrinking of both our army and navy whilst meeting head on the mounting challenges facing our national security.

Matthew Ford, Swedish Defence University

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Defence spending ought to match with the level of threats Britain faces. But there is never enough money to meet all the commitments we have chosen to make. Resolving this dilemma usually involves prioritising commitments, optimising processes or changing the fiscal rules.

Prioritising future global interests while facing immediate threats to Europe makes little sense. But sacrificing the future for the sake of the present implies a lack of strategic foresight. That the UK is not prepared for the current threats to European security tells us that past strategy making has failed.

Optimising the armed forces to reduce waste and inefficiency and deliver value for money has been the mantra for decades. And yet privatising defence housing, third line support and reducing the number of Civil Servants has not delivered on promises.

Changing the fiscal rules holds out the promise that defence might grow through further taxation or by debt financing. Having the money to spend, however, is not the same as having the capacity to deliver on a project.

Rebuilding British defence is now going to take several Parliaments. That is not just about the money. It also involves capacity building and reforging the military’s links to society.

If the UK is going to face up to the threats it now faces then it is going to need to invest in human, industrial and organisational skills. Such investments will be costly but only debt-financing can spread the burden and offer returns beyond deterrence.

Sir Humphry, Pinstriped Line Blog

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Decisions on spending should be seen not in the context of an arbitrary number, but an evidence-based policy driven analysis of British defence priorities and commitments. The next occasion for this will be the 2025 Defence Review, which will ask serious questions of how to balance off global ambition with the need to support NATO. 

British policy makers will need to explore how to deliver credible balanced forces within NATO, while providing sufficient reach for wider scenarios. The balance they will need to strike is around the affordability of an equipment programme which meets these demands, whilst simultaneously rebuilding resilience in munitions and equipment stockpiles (as well as the industrial base to deliver this) and supporting the nuclear enterprise. Add pay, housing and retention to the list and there are lots of complex ‘wicked problems’ which cannot easily be solved without either major changes to existing policies and plans, or potentially adding additional funds to the defence budget. 

It feels that history is repeating itself, with the Ministry of Defence obliged to choose between nuclear and conventional, NATO, and ‘Global Britain’ much as it did in the mid-1960s, although this time it is much harder to identify the likely outcome.

Paul Mason, Journalist and Labour activist

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We face a choice of three scenarios: ‘Plug the gaps’, ‘sustain Ukraine’ and ‘re-arm Britain’. Plugging the most urgent capability gaps with off-the-shelf procurement, while hiking service pay and reversing planned army cuts, would probably take defence spending to 2.5% of GDP, and could be easily financed out of taxation. But it is nowhere near enough.

The ‘sustain Ukraine’ scenario involves the above, plus an urgent state-led and state-funded programme to throw the weight of the UK defence manufacturing and research sector into qualitative enhancements to Ukraine’s combat power. It would be an overt project to focus the economic power of the UK behind the military resilience of Ukraine. If we doubled the value of direct military aid to Ukraine, the whole programme might come to 3% of GDP.

As for comprehensive rearmament, the example of the 1930s shows it might take 7% of GDP by the end of five years, and that could only be financed through borrowing. This author favours this scenario because, by borrowing to invest and through the state direction of skills and resources, we stand a chance of achieving a major economic upside in the process. And it is more fiscally responsible than risking geostrategic failure in a situation involving NATO’s Article V.

As a Labour supporter, this author wants to see all parties come together around a bipartisan commitment to match our capabilities to the scale of the threat. Last year’s ‘refresh’ of the Integrated Review failed in that task. We need a body like the old Defence Requirements Committee, which can balance fiscal risks with military-strategic risks and, if necessary, override peacetime fiscal rules.

James Rogers, Council on Geostrategy

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How much should a major power such as Britain invest in defending itself and upholding its national interests? At one level, this depends on the country’s ambition and national objectives. On another, it can be determined by average spending in relation to the geopolitical backdrop of the time in question. According to the Stockholm International Peace Research Institute’s military spending database:

• During the Cold War (1949-1989), the UK spent on average 6.3% of its GDP on defence;
• During the post-Cold War era (1990-2001), it spent approximately 3.1%;
• During the so-called ‘War on Terror’ (2002-2014), it spent approximately 2.5%.

Thus, during periods of intense geopolitical tension, such as the Cold War, it is necessary to invest in excess of 5% of GDP in defence to protect the national interest. In periods of transition, such as the post-Cold War era, around 3% becomes necessary. And during periods of relative peace, when the main threats are non-state actors, a nation can make do with approximately 2.5%.

Today, the UK spends just 2.23% of GDP on defence, even as a war rages in Europe, British trade routes are disrupted, a major power – the People’s Republic of China (PRC) – is engaged in a sustained naval buildup, and a candidate for the US presidency threatens NATO allies with abandonment.

Clearly, Britain is not investing enough. Based on historical trends, it should be spending at least 3% of GDP on defence, if not more.

Emma Salisbury, Council on Geostrategy

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Shapps says the UK is in ‘a pre-war world’. Yet Jeremy Hunt, the Chancellor, refuses to add new funding for the defence budget, citing only a vague promise to increase spending to 2.5% of GDP ‘as soon as economic conditions allow.’

Hunt is right that economic conditions are not conducive to a large increase in defence spending – but war does not wait for better economic conditions. He might view defence funding in isolation – but increased procurement will bring growth to the British defence industry. He may not believe that conflict will affect us directly within the next decade – but even if that is so, it is what we spend now which will give us an effective military in ten years’ time.

A significant increase in defence spending will require tough decisions to be made; would the money come from cuts elsewhere, increased taxation, or more borrowing? I would say: why not some of each? The whole need not be funded from the same source.

We cannot forget that the defence of the nation is the primary duty of government. A Britain able to defend itself and its allies is secure, prosperous, and thriving. We must not wait for it to be too late – we must increase defence spending, and do it now.

Anne-Marie Trevelyan, Minister of State for the Indo-Pacific

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As the British economy turns a corner in response to the budget delivered last week, there is one principle which must not be forgotten: that our prosperity is built on security.

This is a geopolitical reality reflected in defence budgets around the world. Indeed, the PRC this year announced an increase of 7.2% in its defence budget, and Russia now spends over 7% of its GDP on defence to carry out its illegal war in Ukraine.

Strengthening defence and security is not just necessary to deter the threats emanating from those two countries, but also to protect the UK’s future prosperity. For example, the impact that disrupted global supply chains would have on the British economy in the long-term can not be understated.

For far too long, Britain and its allies and partners have allowed our defence and security to erode under the false premise of a ‘peace dividend’. This must be changed, and we must invest to ensure we can defend and deter effectively. The UK needs to increase its domestic defence and security spending to 2.5% of GDP, and beyond.

We need to grow our skilled workforce, and to strengthen our nuclear deterrent. We need to give industry long-term assurances for a continuous shipbuilding pipeline, and we must get our munitions lines expanding again to aid Ukraine.

None of this is wasted cash. Complex platforms which lead to military advantage do not simply appear; they need investment. We must start that growth now, invest at pace to support our allies and stay ahead of our adversaries.