Shortly before travelling to meet Donald Trump, Sir Keir Starmer announced last week that “we will keep our manifesto commitment to spend 2.5 per cent of our GDP on defence. But in light of the grave threats we face we will bring that target forward so we meet it in 2027.” Moreover, this increase in spending would be funded by cutting spending on overseas development from 0.5 per cent of gross national income to 0.3 per cent.
The prime minister did state that “in the face of ongoing and generational challenges European countries must do more for their own defence. That is incontrovertible.” Yet what the UK will do was also to be “subject to economic and fiscal conditions” drawn so tightly that the increase in defence spending is trivial and the extra cost to be borne by the public is zero. This is not a serious response to the challenges the UK faces. That was true when the announcement was made. It became even truer after Friday’s ghastly meeting with Volodymyr Zelenskyy in the Oval Office. Europe’s security is now up to the Europeans. The UK must be in the lead.
Already in February 2024, the House of Commons Defence Committee published a report arguing that “there are multiple capability shortfalls within the UK Armed Forces”. According to Building Defence Capacity in Europe, published by the London-based International Institute for Strategic Studies in November 2024, the situation is similar in most other European forces.
Moreover, these inadequacies persist despite increased spending on defence in recent years. This is partly because of the size of the historic backlog. It is also because of the urgent need to transfer equipment to Ukraine over the past three years. This leaves a huge hole that European members of Nato, including the UK, must fill as quickly as possible.
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Given the scale and urgency of these pressures, spending on defence will need to rise substantially. Note that it was 5 per cent of UK GDP, or more, in the 1970s and 1980s. It may not need to be at those levels in the long term: modern Russia is not the Soviet Union. Yet it may need to be as high as that during the build-up, especially if the US does withdraw. It may be sensible to finance the temporary increase in investment with borrowing. But if defence spending is to be permanently higher, taxes must rise, unless the government can find sufficient spending cuts, which is doubtful.
In the long run, higher income taxes will be the best way to share out the increased burden of defence. Yet Labour is squeezing aid, instead, just when the US is blowing up USAID. The UK has already slashed its share of GDP spent on aid from 0.7 per cent under David Cameron, to 0.5 per cent under Boris Johnson. Now it is to be 0.3 per cent, close to half of which is likely to be spent on housing asylum seekers.
Abandoning assistance to the world’s poorest is the wrong way to fund the needs of defence. Anneliese Dodds, the international development minister, was right to resign. The funds released are far too small. Moreover, it will increase global misery and weaken the UK’s voice in the world. The decision is a signal of evasion and cowardice.
The truth is that the “peace dividend” has ended with the return of war to Europe. The UK can and must spend more on defence. Without doing so, it will be unable either to have a voice in the joint defence of its continent or even defend itself. It must play a leading role in reinforcing Nato’s European pillar.
Fortunately, the UK can also realistically expect economic returns on its defence investments. Historically, wars have been the mother of innovation. This was spectacularly true of the second world war. Israel’s “start up economy” began in its army. The Ukrainians now have revolutionised drone warfare. John Van Reenen, chair of the council of economic advisers to the UK’s chancellor of the exchequer, Rachel Reeves, has co-authored a paper arguing that a 10 per cent increase in defence research and development triggers a 4 per cent increase in private R&D. In another co-authored paper, he argues that these benefits depend on open and competitive funding of defence innovation. The crucial point, however, is that the need to spend significantly more on defence should be viewed as more than just a necessity and also more than just a cost, though both are true. If done in the right way, it is also an economic opportunity.
Today, the UK confronts a grim new reality. This is unlikely to be temporary. As Russia is emboldened and the US withdraws, the UK government must not pretend that almost nothing has changed and few extra costs needs to be borne. Starmer has to persuade the public to recognise today’s realities. Until now, he has been far too timid.
martin.wolf@ft.com
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