Conservative leadership hopefuls James Cleverly and Tom Tugendhat have derided Labourโs defence plans and called for defence spending to be set at 3% of GDP. With the UKโs finances under scrutiny, is this something that can be realistically achieved?
Launching their campaigns this week, both Cleverly and Tugendhat have called for the UK to spend 3% of GDP on the military. Cleverly made the issue particularly central to his first speech, accusing the government of โvandalismโ against Britainโs defence.
The Prime Minister has stated that defence spending will increase to 2.5% of GDP, a higher level than any point since 2010, however, has given indication of further increases.
The 3% target hasnโt come out of nowhere.
Under Liz Trussโ brief premiership, the UK briefly set a defence target for 3% of GDP. Rishi Sunakโs first full year in office saw defence spending stay roughly level at
In March of this year, Defence Secretary Grant Shapps called for the target to be added to the manifesto. Ultimately Sunak committed to the 2.5% target of Boris Johnson.
Such an increase wouldnโt be cheap. An estimate by the Royal United Services Institute (RUSI) in 2022 found that a 3% target would result in an extra ยฃ157 billion of spending over the course of the next eight years of the decade.
Proponents of the increase point to the significant deficits in the MoD, for instance, the 16.9 billion shortfall in the 2023-2033 military equipment plan. With both major parties in favour of continued military aid to Ukraine, UK equipment stocks deficits are likely to increase.
Whilst no official statement on a proposed three percent target has been issued, previous statements indicate that a further increase is unlikely. Labour stated in July that they would not increase defence spending without economic growth to back it up. This position has likely only hardened with recent revelations regarding the state of public finances.
However, some argue that increasing military spending could create the growth required to fund it.
Could Military Spending Boost Economic Growth?
In April, Rishi Sunak defended the increase to 2.5% as โsupporting new high-quality jobs and economic growth across all parts of the UKโ. The same arguments have been made for the new 3% target.
In economics, this argument is known as โMilitary Keynesianismโ, the idea that greater military spending grows GDP by creating jobs. Proponents of this idea argue that the creation of military-related jobs increases the amount of money people can spend in other sectors, improving the economy more broadly by increasing demand.
This line of thinking dominated British defence policy in the post-war period.
Until the mid-1960s, high military spending was justified by both left and right wing governments as necessary for economic growth.
However, as the economy faltered, in 1966, the Wilson government issued a white paper calling for significant defence cuts to prevent fiscal ruin. Cuts and growth.
Despite her strong foreign policy, Thatcher expanded the trend of cuts even further. In a 1976 speech she told supporters: โThe Soviets put guns over butter, but we put almost everything over gunsโ.
In her view, military spending was a trade-off with not only immediate quality of life, but something that reduced growth by taking money away from the private sector.
Although the decision would have a disastrous effect on the UKโs strategic posture, with perceived vulnerability contributing to the Falklands war, Thatcher would defend this position and continue military budget cuts.
History appears to have borne Thatcher out. The most recent study looking at the effect of defence spending in OECD countries on economic growth concluded that โmilitary spending is undesirable for national economic developmentโ.
As opposed to investment in public infrastructure, increased military spending is rarely able to generate long-term economic growth.
Although investment in military R&D can have positive effects on the rest of the economy, equipment procurement and personnel training, where deficits are the greatest, are far less efficient in improving growth than alternatives.
A further increase in the military budget would almost certainly not pay for itself. At the same time, by diverting money away from the civilian economy, military increases would likely reduce everyday quality of life.
Final Thought
From a cynical perspective, the 3% target looks a lot like a game of political one-upmanship. Only a few months ago, then-Prime Minister Rishi Sunak were soft on defence due to alleged hesitancy to meet Sunakโs 2.5% target. Up until that point, the Conservatives had presided over significant cuts to the military from the levels under Labour.
As it became clear that Labour would support the 2.5% target, some Conservatives now support a 3% target and accuse Labour of dovishness for not doing the same.
To be clear, there are very legitimate reasons to support a budget increase. The UKโs military is undeniably facing critical challenges
However, given the scale of financial uncertainty, the question isnโt just whether or not a further military budget increase is important, but whether a further increase is more important than other things that the government could be spending money on.
With a severe fiscal crisis, implementing tax increases or spending cuts to fuel greater spending on the military seems like an unlikely position for the government to take.
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