As the autumn budget statement approaches, the Labour government finds itself walking a tightrope between national security pledges and the harsh realities of public finances. Chancellor John Healey is expected to formally set aside the previously championed goal of lifting defense spending to 3% of GDP by 2030 when he presents his inaugural budget in October. Decisions on any substantial increase in military expenditure will be deferred until next year's comprehensive Treasury Spending Review.
This policy shift marks a striking reversal for the Chancellor. Back in June, Healey resigned as Defence Secretary over dissatisfaction with the previous Prime Minister Sir Keir Starmer's lack of ambition on military spending. Yet, having since taken the reins at HM Treasury and confronted the UK's strained fiscal ledger, the erstwhile hawk has been forced to bow to reality.
Priority Given to Closing Nearly £5 Billion Equipment Gap
Insiders within government reveal that Healey's primary focus for the October budget is not setting aggressive long-term funding targets, but rather plugging the hole in defense equipment funding left behind by the Starmer administration. This shortfall totals nearly £5 billion, requiring roughly an additional £1.2 billion per year. A senior government official noted: "The urgent task is to fully fund the Defence Investment Plan announced by Starmer, with details to be laid out by the Chancellor in the budget. As for longer-term planning, we will set out the precise roadmap to achieving the NATO goal of 3.5% of GDP on defense by 2035 during next year's Spending Review, and will pin down the exact timeline for hitting the interim 3% target at that stage."
Vast Funding Gap Weighs Heavily on Public Finances
Bee Boileau, a researcher at the Institute for Fiscal Studies, calculates that under current baseline projections, UK defense spending is likely to reach only around 2.7% of GDP by 2030. To push that figure to 3% by the same year: the incremental cost of staging the increase would require the government to raise an additional £10 billion annually at today's prices. If the government were to go further and aim for NATO's long-term 3.5% target by 2035, annual spending would need to climb by £25 billion. Boileau points out that a steady, linear increase would make 3% by 2030 a sensible intermediate milestone, but given the current fiscal climate, the pace of increases will likely be "backloaded" — with the bulk of the spending concentrated at a later stage.
Government Tone Shifts to Caution
In his resignation letter, Healey had previously pressed Starmer with conviction: "As we have discussed many times, I am convinced that setting a clear benchmark of 3% of GDP on defense by 2030 is a decision the UK must make, particularly given the growing threat from Russia." However, the tone at the top of the current government has turned markedly more reserved. New Prime Minister Andy Burnham has already refused to commit to the 3% by 2030 pledge, describing the fiscal environment surrounding the current budget as "extremely challenging." Wes Streeting, who succeeded Healey as Defence Secretary, has likewise stopped short of endorsing the target, offering only the guarded remark that he "feels confident in having a firm ally at the Treasury."
A government spokesperson responded by stating that keeping citizens safe is the government's foremost duty, with both the Prime Minister and Chancellor committed to fully funding the Defence Investment Plan. The official roadmap for meeting the 2035 NATO commitment of 3.5% will be systematically presented during next year's Spending Review, with the timeline for reaching the intermediate 3% goal to be finalized within that framework.
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