WIREDGOV

Framing defence spending as a path to prosperity ignores its poor economic returns, limited job creation, and the opportunity costs of not making alternative public investments.

The government has committed to enormous increases in military spending, from 2.3% of GDP currently (£66.3 billion) to 2.5% by 2027/2028 (£80.5 billion) and 3.5% (£121.2 billion based on the 2029/30 GDP forecast) by 2035. The government has justified these choices by pointing to geopolitical tensions and ‘historic underinvestment’ in defence. The latter of these arguments is questionable – before the four planned increases, the UK’s military spending was among the highest in the world and even exceeded its 1980 spending in real terms.

To sell a huge financial outlay on foreign and defence policy alongside self-imposed restrictions on investment elsewhere, Starmer’s government claims that the defence sector will become an ‘engine for growth’, a route to ‘prosperity’ and a source of security for working people. These arguments are now lynchpins of the government’s narrative as it fails to deal with stagnation and real incomes are squeezed. They have featured prominently in recent government planning, with the Strategic Defence Review (SDR), National Security Strategy, and Industrial Strategy centred on the alleged economic benefits of defence spending, especially of investments in emerging technologies. 

Like any form of public spending, military contracts stimulate economic activity. However, defence investments also have specific limitations as a growth strategy. Often missing in economic debate is comparison of the efficacy of different forms of government stimulus. Without a comparative approach, discussions of the economic benefits of defence spending are presented in a vacuum. The lack of comparison conceals the limited growth impacts of defence investment, the risks of concentrating public resources in a low-growth sector and its inadequacy as a jobs strategy, leaving only the argument that defence investments can be a ‘moonshot’ – a gamble on long-term innovations that would better be addressed directly.

Click here for the full press release