IFS Zooms In: The Economy Why is defence spending rising?
Sep 26, 2025
In this discussion, Matthew Savill, Director of Military Sciences at RUSI, and Max Warner, Senior Research Economist at IFS, dive into the implications of the UK's surge in defence spending. They examine historical trends, detailing the shift towards investment and the pressures of modernization. The guests debate whether this increased funding is a response to military needs or merely accounting adjustments. They also tackle how such spending might affect economic growth and the potential fiscal ramifications of committing to 3.5% of GDP for defence.
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Defence Spending Has Reversed Its Long Fall
- Defence spending fell as a share of GDP for decades but has risen from ~2.2% pre-Ukraine to 2.5% now.
- The government pledged 3.5% by 2035, implying ~£36bn extra annually and major fiscal trade-offs.
Budget Vs. Spending: Planned And Unexpected Costs
- The defence budget covers planned pay, equipment and infrastructure while defence spending includes unplanned operational costs.
- Operational supplements come from the Treasury Special Reserve and are often agreed belatedly.
People Still Dominate The Budget
- Personnel costs are the single largest item (~just under 40%), slightly ahead of equipment spending.
- Around 30% covers estate, infrastructure and nuclear-related costs within the remaining budget.