The UK Is Boosting Defence Spending. But Will It Boost Defence?
Will the announced spending increase significantly boost UK defence?
By Stuart Dee and Lucia Retter
This week in Warsaw, the UK Prime Minister announced a defence spending increase to 2.5 percent of GDP by 2030, a cumulative increase over that period of approximately £75bn. More details came in the subsequently published document, which presented a raft of policy announcements, including a new Defence Innovation Agency, new strategies for munitions and national resilience, and new proposed changes to the Levene Model, which has defined the structure of UK capability development and acquisition since 2011.
The Prime Minister’s announcement takes the United Kingdom beyond the NATO target that members should spend 2 percent of Gross Domestic Product (GDP) on defence. This latest funding increase is a clear response to the changing and challenging geopolitical context. The United Kingdom is in good company: 10 European NATO members, including the United Kingdom, are now at or exceeding the 2 percent target. Poland alone has more than doubled its defence budget since 2014, and currently spends 3.8 percent of its GDP, or around $31.6bn (PDF). Germany, an economy more directly comparable to the United Kingdom, has increased its spending significantly in recent years, and now has a defence budget of , though does not yet meet NATO’s 2 percent target.
The announcement sends important signals about the United Kingdom’s intent and commitment to defence and security, but, if followed through, will the spending increase significantly boost UK defence?
This latest funding increase is a clear response to the changing and challenging geopolitical context.
The devil is in the details. First, as the Institute for Fiscal Studies has noted, the £75bn figure assumes a “flat spending” profile (e.g. no change, year on year, in the defence budget). A completely flat spending profile would have been an unlikely state of affairs (indeed, taking inflation into account, it would have caused the United Kingdom to drop below the 2 percent target). From this perspective, while this is a windfall for defence, it should not be seen as £75bn of “new money.”
Second, it is worth noting that the 2.5 percent of GDP figure is arrived at by including elements such as the contribution of military pensions and the cost of intelligence to bolster the defence budget as a percentage of GDP. Though allowable under NATO rules, that calculation has not consistently been part of the United Kingdom’s basis of assessment in the past.
Third, it is not yet clear how the windfall will be deployed in UK defence. In the December 2023 appraisal (PDF) of the Defence Equipment Plan to 2033, the National Audit Office identified funding shortfalls “of between £7.6 billion and £29.8 billion, depending on whether risks or opportunities materialise.” How much of this windfall will be destined to backfill existing cost overruns remains unclear, but assuming at least some of it is deployed to cover that shortfall, it will not contribute to an unanticipated lift in capability.
Fourth, there remain questions about how to put the UK’s defence industrial base on a war footing, given the already considerable demands placed upon it. The United Kingdom maintains a wide range of international defence commitments, which differentiates the United Kingdom’s defence spending priorities from similar-sized powers. The United Kingdom’s industrial base is already ramping up efforts to fulfil ambitious international commitments, including the joint UK, Italian, and Japanese Global Combat Air Partnership (GCAP) and AUKUS, a planned trilateral nuclear submarine and advanced technologies programme with the United States and Australia. RAND research has consistently shown that workforce skills and supply chain constraints impede the defence industry’s capacity to quickly “surge” to meet government demand, even when clearly articulated. This may prove to be a headwind.
The ambition to roll out a National Defence & Resilience Strategy is much-needed and, if embedded into a societal resilience model, has the potential to be impactful.
These important considerations aside, there are many positive elements: the ambition to roll out a National Defence & Resilience Strategy is much-needed and, if embedded into a societal resilience model, has the potential to be impactful. Likewise, the proposed Defence Innovation Agency places a welcome focus on commercialising and catalysing defence early-stage R&D in a rapidly evolving competitive landscape for key technologies, where defence risks falling behind. Similarly, as recently addressed in a RAND Europe commentary, the ambitions of the new Integrated Procurement Model are laudable, albeit rooted in concepts that have been challenging to implement historically.
There is much in the announcement to welcome: it is symbolically important, both to UK allies in Europe and across the Atlantic, as well as to its adversaries, particularly bearing in mind that Russian defence spending, according to SIPRI (PDF), increased by 24 percent last year and is soon due to hit 6 percent of GDP. There are some much needed announcements on innovation and national defence, as well as changes to the Levene Model. The knack will be in implementing all these initiatives.
Stuart Dee and Lucia Retter are research leaders in defence at RAND Europe.
This originally appeared on The RAND Blog on April 26, 2024.
