The Chancellor delivered his UK Spring Budget yesterday afternoon. It is likely to be the last fiscal event until the General Election later this year. 

What was in it for defence? Practically nothing. The only reference to defence during the Chancellor’s speech was a re-commitment to spending 2.5% of GDP on defence ‘when economic circumstances allow.’ It wouldn’t have escaped the attention of many defence journalists that close inspection of the Budget policy document reveals, as reported by CMS Strategic at the time, that the MoD’s Resource Departmental Expenditure Limit (RDEL) will decrease from £35bn in 2023-2024 to £32.8bn in 2024-2025, and Capital Departmental Expenditure Limit (CDEL) will also decrease from £192bn in 2023-24 to £18.9bn in 2024-25. A trend that contradicts the ‘strong on defence’ message that the Government is trying to convey.  

A passing reference was made about the UK’s steadfast support for Ukraine, but no new money was committed. As readers may recall, in January 2024 the Prime Minister announced an additional £2.5 billion of military assistance for 2024-25, an increase of £200 million on the previous two years that was designed to utilise the UK’s military expertise and defence production. 

Overall, it appears the Government has decided that defence spending is not a priority at present as the Prime Minister and Chancellor look at providing pre-election tax giveaways and support for the NHS to win as many votes as possible in the months remaining before polling day. The Defence Secretary warns of a “more contested world” when describing the unstable international context so seeing spending flatlining and now going into reverse is a concern. Failure to invest more in the Armed Forces will leave the UK at best flat footed in any future conflict and at worst badly exposed.  

To take a step back, the Government did commit £11bn of investment in defence at the Spring Budget 2023. As detailed in the Integrated Review Refresh of 2023, £5bn of this is allocated to the UK’s defence nuclear enterprise and stockpile resilience. The context here is important. As this money was granted with Ben Wallace as Secretary of State for Defence who, by most accounts, was a successful Defence Secretary. He was a doughty champion for more money for the MoD, which is the fundamental job of any Secretary of State. Now on the backbenches until the next election, he has recently called for defence spending to increase to 3% of GDP. In a recent Op-Ed for the Telegraph Wallace said ‘Do you think in No 10 that the penny has dropped? Do you think in the offices of Sir Keir Starmer that they are aware of the world they may face? We are witnessing a world in conflict: Ukraine, Gaza, the Red Sea and Iran. And storm clouds are gathering in the Taiwan Strait and South China Sea’. 

Interestingly, committing the UK to spend 3% of GDP on defence was the position of Jeremy Hunt when he was a Conservative leadership hopeful in 2022 and the view taken by former Prime Minister Liz Truss (remember her!). This is Grant Shapps’ first budget in the role and defence has seemingly been muscled out by other departments. 

To say that Rishi Sunak is uninterested in defence is perhaps to oversimplify things. It is fairer to suggest Sunak’s priorities are numerous and an increase in defence spending doesn’t seem to feature high on that list. 

So, what does the future hold for defence spending? With Labour odds-on to win the next election will they commit more money to our nation’s defences? In short, it’s too early to tell. Shadow Secretary of State for Defence, John Healey, told journalists and CMS at the Policy Exchange last week that he wouldn’t commit to any percentage of GDP spend until Labour are in power and can look over the MoD balance sheet in detail. What we do know is that the Labour Party intend on launching a comprehensive defence and security review if it wins the next election. Presumably delaying any significant changes in the overall capital budget until that is concluded. It is therefore the case, once again, that the defence industry will need to ‘watch this space’ as macro-economic decisions on increases to the defence budget get kicked into the long grass. 

Written by: Jamie Hall, Senior Account Manager at CMS Strategic

UPDATE: The Defence Select Committee is keen to meet Defence Secretary urgently on the Department’s finances:

(2/3) The Defence Secretary has referred to us being in a “Pre-War” state. This does not appear to be reflected in his Department’s Budget allocation.

— Defence Committee (@CommonsDefence) March 6, 2024

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