Nato is set to agree to the US President’s call to dramatically increase defence spending as a proportion of GDP – the move could have unwelcome consequences
Earlier this week an announcement was made that could have a huge impact on defence in Europe. Nato Secretary General Mark Rutte revealed that its 32 member states were set to agree on raising collective defence related spending across the alliance to 5 per cent of GDP by 2032.
It has been reported that Spain has been the only member holding out against the plan – which would meet the demand made by Donald Trump at the end of last year. It could be formally unveiled at a meeting of Nato defence ministers over the next week.
Spending ratcheting up faster than expected
The target is much higher than even insiders had been expecting would be agreed.
“We initially thought Trump’s talk of 5 per cent before taking office was just a hardline ploy to push the rest of us up to 3 per cent,” one Nato official told The i Paper.
For the UK, if the burden were to be shared equally – not a given – it would mean more than doubling the current defence budget, currently only set to reach 2.5% of GDP by 2027.
Whether it actually reaches 5 per cent in Britain by 2032 seems far from certain. Defence Secretary John Healey has only just, on Friday, apparently hardened up the Government’s “ambition” to reach a much more modest 3 per cent by 2034, saying he had “no doubt” the UK would get there.
Wherever the final figure lands, the direction of travel is clear: Trump is getting his wish – European defence spending is ratcheting up.
You might expect the extra billions to be unadulterated good news for the Ministry of Defence (MoD) as it prepares for tomorrow’s announcement of the UK’s Strategic Defence Review.
But for the Britain such a large rise could end up creating a whole host of new problems. Some, like the potential for prices to be hiked as newly flush European defence ministers compete to buy the same gear, might be ironed out by proper coordination within Nato.
And while that, in itself, may be no mean feat, other issues could be harder to resolve.
Politics of buying more arms as you cut benefits
First, there are the politics. At a time of global uncertainty and war in Europe, increased defence and security spending is easier to justify than it had perhaps been during the years of the so-called “peace dividend”.
However, for some a big boost might still sit uncomfortably against the backdrop of Sir Keir Starmer’s Government cutting benefits and other public spending.
And there are other factors that could amplify this awkwardness for Labour. The first is the perennial problem that comes for governments justifying defence spending to the public – that it’s inherently expensive and often wasteful.
Recent MoD history is littered with examples of multi-billion pound deals where the value for money offered by the end result has been questionable.
A project to build two new aircraft carriers came in five years late in 2017 at £6bn, nearly double the original budget. When the huge ships finally were launched they experienced a succession of embarrassing mechanical failures and, more worryingly, some believe that they are already obsolete.
Meanwhile, the first of what was supposed to be hundreds of Ajax armoured vehicles were only delivered this year, eight years late and around £1.5bn over budget.
Experts say the UK’s ambition to be a major player on the European, if not the world, defence stage could make this kind of problem even more acute.
“For countries like Britain, who want to be on the cutting edge of defence technology, there will always be a risk of higher spend than for countries who are happy to be middling military powers,” says Tom Waldwyn from the International Institute of Strategic Studies.
“If you are pushing the boundaries of development, things may be more difficult and cost more than you expected, or new technologies might become obsolete in the procurement process, meaning certain kit is never used as intended.”
Incompatible equipment wastes time and money
The problems can beyond the very high-profile errors of judgment. There are pitfalls that could lead to wasteful spending riddled throughout almost all areas of defence procurement.
Tobias Elwood, former chair of the Parliamentary Defence Select Committee, tells The i Paper: “We need consistency of standards across the Nato alliance if this spending is to be as effective as possible.
“Currently we have a situation where British-made Brimstone missiles cannot be fired by American-made F-35s or from Apache helicopters. Inconsistencies like these make it more likely that we have to buy duplicate equipment or adapt what we have, which takes time and money. So, when you are talking about boosting the budget this much, that creates potential for a lot of waste.”
And that’s if extra money is actually available for frontline services. Officials and analysts warn that a rush to hit a new arbitrary target can lead to a budget being padded out. For the past decade, the UK has included things like civilian pensions and other administrative costs for running the MoD as part of its total for defence spending.
It also included the enormous costs of maintaining the nuclear deterrent, which many in the armed forces privately criticise as it can take money away from frontline services. And that was when the Nato target was only 2 per cent.
Jump to 5% expected to lead to creative accounting
“The jump to 5 per cent is so drastic it will likely encourage countries to do some creative accounting,” says Waldwyn. Rutte has said the expects the 5 per cent to be broken into categories by countries, mostly a split of 3.5 per cent on conventional defence spending and 1.5 per cent on security-related items. However, as Waldwyn points out, that could muddy the waters even further as to exactly what allies choose to include.
“I wouldn’t be surprised if some countries start to include general infrastructure spending, using the logic that roads and railways are needed to transport weapons, as an example,” he says.
One defence industry insider warned: “Spending more doesn’t automatically mean getting more capability. Without a clear strategy, there’s a real risk of investing in the wrong things: more ships with no one to crew them, more missile launchers, but no missiles, more drones but too few trained operators.
“More money might go to housing, salaries, or pensions. These are absolutely important for morale and retention, but they don’t directly boost frontline readiness.”
How to avoid bad buys
“The key thing is not to rush and spend,” says a British defence source. “We need to properly absorb the Strategic Defence Review and take stock of exactly what we have and what threats are coming over the hill.
“That might mean donating conventional ammunition hardware to Ukraine while focussing on things like sensors and cyber security at home, rather than more frigates and tanks.”
Elwood says that the key is to build modularity into new equipment that we buy and pushing for stronger common standards across Nato. “With big-ticket items, we will need to be able to easily upgrade them over time, as we won’t be able to afford to replace them. That means new jets or tanks can have their sensors easily upgraded. The onboard computers must be able to easily update to new software. You’d be amazed how often things like this are a problem.”
With European security in the worst place it’s been for decades, a boost to the national defence budget might at first glance seem like a godsend for Starmer. However, between domestic pressure on public spending and demands from allies to meet this new target, the risk of throwing good money after bad ideas will be greater than any time this century.
A Ministry of Defence spokesperson said: “This Government is delivering for defence. We have announced the biggest sustained increase in defence spending since the end of the Cold War, boosting funding to 2.5 per cent of GDP by 2027, with an ambition to reach 3 per cent in the next parliament.”
“This investment will make Britain stronger and safer in an insecure world and will help us build a modern and resilient Armed Forces, with cutting-edge capabilities.”
