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This policy brief contributes to an understanding of the government's decisions on the UK’s defence budget announced in the Integrated Review Refresh and the Spring Budget in March 2023.
- UK defence spending is set to increase from 2.06% of GDP in 2019–20 to 2.27% of GDP by 2024–25 (or 2.35% of GDP if annual spending on Ukraine continues at its current level).
- The core defence budget is set to rise at an average rate of 2.2% per annum in real terms over this period.
- This growth is especially noteworthy given that real-terms GDP is projected to barely increase at all over the same period.
- Between 2019–20 and 2024–25, core capital spending is due to increase by some 62% in real terms. In contrast, real-terms day-today core resource spending is due to fall by some 4%. Despite below-inflation pay settlements for the Ministry of Defence workforce (both military and civilian), downward pressures on personnel numbers are therefore likely to continue.
- Of the £11 billion in extra defence spending over the next five years announced in the Spring Budget, some £9 billion has been allocated to the nuclear programme (including nuclear-powered attack submarines). The nuclear share of the 10-year equipment budget is set to rise from 25% to 34%.
- The announced increases should ensure that the UK’s defence budget remains, both in absolute terms and as a percentage of GDP, higher than that of France, at least until the next French presidential election in 2027.
- The next major Defence Review – likely after the general election – will come at an important point for the two largest conventional programmes of the next decade – the AUKUS submarine and the Global Combat Air Programme. While both could offer opportunities for cost sharing, significant risks remain.
- In the Integrated Review Refresh, the government set out a ‘new aspiration’ to increase defence spending to 2.5% of GDP ‘as the fiscal and economic circumstances allow’. If the post-election Spending Review decides to do so within five years, this would require an extra £42 billion. Such an increase could only be afforded through a proportionate increase in the national tax burden.