A response to government commitment to spend 5% of GDP on national security

Bee Boileau, a Research Economist at IFS, said:

“The government announced today that it will commit to spending 5% of national income on national security in 2035. This will be split between 3.5% of national income on ‘core’ defence spending and 1.5% of national income on ‘resilience and security’ spending.

We currently spend around 2.4% of national income on ‘core’ defence. Plans set out at the Spring Statement and confirmed two weeks ago at the Spending Review are for defence spending to increase to 2.5% of national income (or 2.6% including intelligence and security services) from 2027-28 onwards, and then remain at this point until the end of the parliament. Increasing ‘core defence’ spending from 2.6% to 3.5% of national income would mean, in today’s terms, spending around an additional £30 billion a year.  

The government announcement implies that the 1.5% of national income for ‘resilience and security’ spending will be reached in 2027-28, suggesting this is already covered by the departmental budgets that were set at the Spending Review. This is therefore a decision about how spending will be classified – and, perhaps, how individual departments’ budgets will be allocated – rather than an announcement of any additional money on top of existing budgets.  

Today’s commitment concerns the level of defence spending in 10 years’ time. This means it does not necessarily affect the spending plans Rachel Reeves set out at the Spending Review earlier this month, which covered only this parliament. It therefore may not directly affect decisions at the Autumn Budget. But the current plan to hold defence spending flat at 2.6% of national income between 2027-28 and 2029-30 looks notable in the context of this new commitment. It might be more sensible to ramp up defence spending gradually over the 10-year period: we might therefore see existing plans revised up at the next Spending Review expected in 2027.

Zooming out, spending 3.5% of national income on defence is certainly not unprecedented. We last spent 3.5% of national income on defence at the end of the 1980s, and in previous decades we spent a much larger share of national income on defence. But in the past the government was also spending much less on health. We are now likely to see health and defence spending rising as a share of national income for a sustained period of time, which will put considerable additional pressure on the public finances and the size of the state in the coming years.”