The UK Treasury has yet to undertake any substantial analysis regarding the financial adjustments required to meet the government’s commitment of elevating defence spending to 3.5% of GDP, a promise made to NATO. This revelation, shared during a joint session of the Treasury and Defence committees, leaves crucial questions about the future of UK defence expenditure unanswered.
Treasury in the Hot Seat
Lucy Rigby, the Chief Secretary to the Treasury, faced intense scrutiny from MPs concerning the lack of groundwork to back the ambitious defence spending target. During the session, Rigby maintained that the responsibility for future funding strategies would fall on the next prime minister. This point was underscored as Keir Starmer, currently attending his final NATO summit in Ankara, reaffirmed the UK’s pledge to reach the 3.5% target by 2035.
The absence of a clear financial pathway was notably linked to the recent resignation of John Healey, the former Defence Secretary, further illustrating the mounting pressures within the government over defence funding.
When pressed about whether any preliminary analysis had been conducted, Rigby’s response was candid: “No, is the short answer.” This admission raised alarms among committee members, with Bobby Dean highlighting the daunting prospect of needing an additional £30-40 billion. Such a substantial increase, he noted, would necessitate a rise of 3 to 4 pence on all income tax rates. Rigby acknowledged that public consent for such financial changes would be essential.
A Future Without Clear Direction
The government has set an interim goal of achieving 3% defence spending in the next parliamentary term, but the specifics on how to reach this target remain vague. Rigby suggested that the details would be addressed in the next spending review, anticipated to occur in mid-2027, by which point a new Prime Minister, likely Andy Burnham, may be in office.
“We’ve said for the next parliament, we will get to 3%. The question is when in the next parliament,” Rigby explained. However, she repeatedly emphasised the complexity of the financial landscape, asserting, “It’s not straightforward: money is finite.”
Healey’s resignation came shortly before the contentious defence investment plan was to be published, which proposed an additional £15 billion for the Ministry of Defence over four years, bringing spending to 2.7% of GDP. While Whitehall departments have been instructed to revise their investment plans to facilitate this shift, Rigby admitted that an extra £4.7 billion would still need to be sourced in the upcoming autumn budget.
Tensions Between Departments
The relationship between the Treasury and the Ministry of Defence has been described as fractious, with both Rigby and Luke Pollard, the Minister for Defence Readiness and Industry, insisting that cooperation has improved. Pollard, drawing from his naval background, even joked, “I come from a naval family where I was taught from an early age that the Royal Navy has two enemies: the French and the Treasury. We’re now good friends with the French… and I would say that the process between the Treasury and MoD has been on a journey.”
However, the discussions revealed lingering doubts about the adequacy of financial planning, with Meg Hillier, chair of the Treasury committee, recalling the “black hole” in public finances identified when Labour took power two years ago. She linked the current funding strategy to the previous government’s shortcomings, which left many projects underfunded.
Why it Matters
The lack of concrete financial analysis from the Treasury poses significant implications for the UK’s defence capabilities and its commitments to NATO. As geopolitical tensions rise, the ability of the UK to adequately fund its military remains critical not just for national security but also for its standing on the global stage. Clarity and transparency in funding strategies are essential to ensure that the armed forces are adequately equipped to meet future challenges. The government’s ability to navigate these financial complexities will ultimately determine the UK’s military readiness in a rapidly changing world.
