The UK is staring down a huge financial task to meet NATO defence spending commitments, a new report warns.
To hit the target of raising defence spending from 2.3 per cent of GDP to 3.5 per cent by 2035, Britain will need to find an extra £36 billion a year — a level of spending not seen since 1988.
Why Defence Spending Is Rising
The increased funding is driven by growing concerns over Russia and the UK’s obligations to support Ukraine, including the potential for a peace stabilization force.
As the Institute for Fiscal Studies (IFS) highlights, the rise in defence expenditure comes at a time when other areas of public spending, like health, have grown dramatically, now taking up a far larger share of GDP than in the 1980s.
Tough Choices Ahead for Public Spending
The IFS cautions that reaching the 3.5 per cent target will require significant cuts elsewhere.
The scale of the increase is roughly equivalent to the combined budgets of the Ministry of Justice and the Home Office — including police, prisons, and border officials.
Alternatives such as borrowing more money are unlikely to be sustainable long-term.
Outgoing Chief of the Defence Staff, Admiral Sir Tony Radakin, has echoed this warning, saying that inefficiencies across the public sector, including within the Ministry of Defence, are holding the country back.
“The state is not working,” Radakin said, highlighting the need for a comprehensive overhaul of how government departments operate.
International Pressure to Maintain Military Influence
As a leading NATO member, the UK faces additional pressure to meet spending commitments, particularly to maintain influence among alliance partners.
While Britain was historically the second-highest spender after the US, it has recently fallen behind Germany.
Meanwhile, countries like Poland have rapidly increased their defence budgets to nearly 4 per cent of GDP, even if their overall spending is smaller than the UK’s in real terms.
Economic Impact of Defence Investment
The IFS report also notes that the increased spending will benefit the UK economy, particularly through high capital expenditure on equipment rather than personnel.
Investment in advanced military technology — from warships to stealth jets — is nearly double what it was in 2000, driven by smaller armed forces and a focus on high-tech weaponry.
Regions such as the South West of England are expected to see the greatest economic growth from this spending.
Timing and Value for Money
Experts warn that much of the rise to 3.5 per cent of GDP will not occur until the 2030s, which may ease immediate pressure on public finances.
However, this delay could also make it harder to secure good value for money if spending ramps up rapidly as the target date approaches.
Beyond the 3.5 per cent core defence commitment, the UK must also allocate an additional 1.5 per cent of GDP to defence and security-related projects, including national infrastructure.
Comparisons With Germany
While the UK has set itself a decade to reach the 3.5 per cent target, Germany aims to achieve a similar increase by 2029, relying heavily on borrowing.
The German government has relaxed its constitutional “debt brake” to ensure it can fund this accelerated defence buildup.