Sunak pledges urgent Defence spending uplift ...in five years time
The 2.5% is smoke and mirrors: Labour is setting the agenda
The UK government announced yesterday that it will raise Defence spending to 2.5% of GDP by 2030. Speaking in Poland, prime minister Rishi Sunak hailed the decision as a “generational” change, that would put the UK on a “war footing”.
I’m sorry to use intemperate language but it is bullshit. As readers of Conflict & Democracy know, I want to see Defence spending rise much further and much faster. So I welcome Sunak’s announcement not for its generosity but because it signals the end of a period of strategic paralysis in British thinking about Defence.
Let us first kill the assertion that raising Defence to 2.5% of GDP is the “biggest strengthening of our national defence in a generation”. This chart from ThinkDefence says it faster than a thousand words…
Yes, if we reach 2.5% by 2030, we will be back to where we were when Northern Rock went bust.
Now to debunk the detailed figures. Numerous people have had a go at this overnight, but Ben Zaranko of the Institute for Fiscal Studies does it best.
Sunak says UK Defence spending will rise to £87bn in 2029-30, with an extra £74bn spent over the next five years. Given the MOD has a 2024-5 budget line of £52bn, that sounds generous. But today’s spending is not the baseline Sunak is using…
Sunak is using NATO-qualifying Defence Spending as the baseline. This includes money for the intelligence services and military pensions, plus aid to Ukraine, and is measured at £64.6bn this year.
To get the “extra £75bn” Sunak assumes this baseline would have remained static in cash terms, putting the UK in breach of its obligation to spend at least 2% on GDP. Here are the government projections:
So it’s not an extra £75bn over five years. It’s an extra £24.6bn like for like.
Which is welcome, but too little, too late and - politically - too duplicitous. Here are my workings based on the government’s published figures:
In summary, with Sunak’s proposal, the government will be spending just £7bn a year more than it would have, in five years’ time.
It’s still an aspiration
And I stress, the political status of this remains aspirational. It was announced in a press release from the Prime Minister’s Office and published in a document that can have no fiscal status until it is presented to Parliament by HM Treasury. The MOD does not even have a budget beyond next year.
So another way of describing the fiscal aspects of Sunak’s speech is “an aspiration” to spend 2.5% of GDP. Which is what he already had.
However, there are some welcome details in the announcement yesterday. The first is, more money for Ukraine and a significant increase in the supply of Storm Shadow missiles.
The second is that Sunak has adopted Labour’s proposal to reform the MOD so that it becomes a fully functioning military-strategic HQ (MSHQ).
Third, they are going to centralise both procurement and the direction of innovation, as Labour has also proposed.
These are entirely sensible moves, and have been made under pressure from senior ex-military commanders frustrated at the MOD’s fragmentation and “business as usual”.
Why it has taken more than 26 months after the full-scale invasion of Ukraine to make these moves should be no mystery: Sunak and Hunt opposed any move to match the scale of the threat with new resources in 2023 - and having lost the argument, the pro-Defence wing of the cabinet - Wallace, Heappey - resigned quietly rather than rebel.
Borrowing is the key
The politics of this is clear, if lame. Labour will be challenged to “match” the 2.5% spending pledge. But it cannot do so because there is no commensurate budget document that explains where the money comes from. No politician in their right mind would commit to spending an extra £7bn a year without knowing whether that implies cuts to unprotected departments, or increased borrowing.
In fact - note to broadcasters - anyone not making this the #1 question to Sunak, Hunt or Shapps this weekend is derelict in their duties.
At a wider level, I think we need to get away from these arguments about sub-1% changes in Defence spending. The real question is: what’s the threat, what capabilities do we need to fulfil the 25 Defence Tasks specified in the MOD’s operating model, and how much will it cost.
A government demonstrating urgency would be answering those questions right now, in an emergency SDSR. But the fact that we don’t even reach 2009 levels of Defence spending until 2030 demonstrates there is no urgency.
Where this debate has to go next is towards two questions: what kit do we need to prioritise and how do we pay for it. I will leave the former question for now and conclude with this: in the 1930s, even that cash-strapped austerian Stanley Baldwin accepted that the only way to pay for rearmament was borrowing.
We are going to need a lot more than the extra £24bn pledged by Sunak yesterday, and it’s going to have to be borrowed. By my calculations, even if you started to spend 2.5% this year, and changed nothing else about the Budget, debt would still peak below 100% of GDP and be falling in the final forecast, while borrowing would be well below 3% and falling.
Strategically, the best thing about Sunak’s move is that it opens up the debate, and we who advocate debt-funded rearmament to meet the threat have to pile in and exploit the breakthrough.
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