Another UK Defence spending increase is on the way, but are we being short-changed?

UK Defence Spending

Rumours abound today that the UK's March budget is going to provide an additional £5 billion in defence spending over 2 years, a move that is quoted as "disappointing" for defence Secretary Ben Wallace who is reported as asking for £11 billion.  It's worth noting that these numbers are being talked about before the Integrated Review Refresh has been completed.

I thought a would look back at previous defence budget promises, and see how they compare to reality.  I started back in 2019/2020 as the baseline, and reviewed what had been promised at various times.  The history of promises looks like this:

  1. The Conservative Party 2019 General Election Manifesto promised to increase defence spending by inflation plus 0.5%.  This commitment was of course made at a time when inflation was considerably more benign than it is now.
  2. In November 2020, then Prime Minister Boris Johnson announced "The biggest programme of investment in British defence since the end of the Cold War" which added an additional £16.5 billion on top of the manifesto commitment.  This formed the much heralded 4-year spending review settlement.
  3. The Government's 2022 Autumn Budget Statement planned a cut in the defence budget in FY23/24 after a spike in FY22/23, breaking the manifesto promise and missing the 4-year settlement after inflation is accounted for.
  4. In the run-up to the March 2023, it is rumoured that spending will increase by £5 billion over 2 years.  I assume this is on top of the 2022 Autumn Statement numbers.

If we look at what should have happened to the annual defence budget compared to the various promises above, and simply compared to inflation (using OBR forward inflation forecasts), the picture looks like this:

UK Annual Defence Budget Scenarios

What we see is that after FY22/23 (when inflation is very high), the UK annual Defence budget falls behind both the manifesto commitment of inflation plus 0.5% and the Spending Review Settlement.  The rumoured additional £5 billion over two years would act to maintain spending in real terms after inflation is taken into account.

Looking on a cumulative basis at total spending over five years, the picture looks as follows:

Cumulative UK Defence Spending

What this shows is that the rumoured additional £5 billion has the effect of bringing cumulative defence spending by the end of FY24/25 back up to the number it should have been in accordance with the manifesto promise of inflation plus 0.5%, but does leave UK Defence budget short of around £16 billion on a cumulative basis, after inflation, when compared to the 2020 Spending Review Settlement.  It's no surprise that Ben Wallace is after more....

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