To 2.5%, Infinity and Beyond? How not to look at Defence Spending

A Quickfire on Money and Guns.

What percentage of GDP should the UK spend on defence?

This question has become something of a game of one-upmanship amongst defence commentators, who throw out ever-higher numbers to prove their hawkish credentials. The going ‘within possibility but not entirely mental’ answer is currently 3%; I’m sure 3.5% will start doing the rounds at some point.  During the election both the Tories and Labour decided to pledge 2.5% ‘when the economy allows’, which allows them to look hard enough while still managing to not spend money if they don’t want to.

However, frankly this all misses the point.

The GDP debate has reached totemic status in conversations about defence spending since the adoption of the 2% baseline target by NATO in 2014. There is an understandable political logic to this: numeric values are catchy, easy to remember, and a passable rough guideline for comparing countries – useful if you are a US President wanting to browbeat certain countries (read: all of western Europe) into spending even close to their fair share on collective defence.

However, focussing on GDP percentages does not tell you much about the actual capability of the country in question. Its also makes it easier for complacent countries to ‘game the system’. The UK proudly states that it has officially never spent less than the NATO baseline of 2% of GDP. Wonderful - but it means nothing if the British Army is barely able to deploy a mechanised brigade to Europe. Nor does the UK like to highlight that for several years it only managed to reach 2% by including military pension costs, which is hardly a useful metric of defence capability.

A telling infographic on European defence spending (Credit: IISS)

This is a point worth emphasising: more spending ≠ greater capability (necessarily). This is particularly salient for the UK. A glance at the IISS Military Balance will reveal that the UK is by far the largest spender in Europe, but it has significantly fewer military personnel than our neighbours. Of course, numbers are not everything – but they do matter (despite what the Defence Command Paper might claim). France, a nation with a similar-size GDP, population, global ambitions, aircraft carriers AND nuclear weapons can still generate almost 60k more troops on a smaller budget. There is no serious justification that anyone can give as to why this is an acceptable situation. One might very well ask where the hell all of our money is going.

Yes, the MOD needs more cash; however, it is more important for the MOD to spend the cash it does have better. This is doubly true considering that the department is unlikely to receive much more money any time soon. The public sector is broke, and Labour are unlikely to prioritise defence over hospitals, potholes and policemen.

How to spend better is another question. There is good evidence that MOD finance is not fit for purpose. Grinding bureaucracy, slow bespoke procurement, poor project management and insecure financing in order to satisfy Treasury requirements all ramp up costs. It is an open question as to whether all the multitude of services contracted out by the MOD are any form of long-term value for the output provided (ahem Capita).

A strategic review is in the works – the third since 2021 (remember when strategy was supposed to last more than eighteen months?). It is likely to mention GDP targets, but unlikely to leave the MOD flush with cash. This will almost certainly be talked about by the commentariat. However, discussion of GDP numbers is something of a red herring. We should be talking about capability. A GDP percentage is just a number; what matters is what the money buys.

---