The recent announcement regarding an increase in UK defence spending has sparked a debate among experts, who caution that the additional funds may be significantly absorbed by escalating costs associated with Armed Forces personnel, the nuclear deterrent system, and ongoing demands on the equipment budget. Keir Starmer’s commitment to inject an additional £6 billion in real terms into the defence budget by 2027—ultimately aiming for 2.5% of GDP—is seen as a crucial step. However, this increase is anticipated to primarily address existing shortfalls in weaponry and personnel, while a further increase to 3% during the next Parliament may focus on new investment projects.
This week, Prime Minister Rishi Sunak’s unexpected announcement regarding the accelerated rise in defence spending to 2.5% by 2027 has been positively received by Donald Trump’s administration, coinciding with Starmer’s visit to Washington for discussions with the US President. However, concerns linger about the sustainability of this funding, especially as the Prime Minister did not deny rumors that the government’s controversial agreement with Mauritius over the Chagos Islands—estimated to cost £9 billion—might be financed from the uplift in the Ministry of Defence (MoD) budget.
Experts, including Matthew Savill, director of military sciences at RUSI, emphasize that existing pressures on the defence budget—such as a shortfall in equipment funds, increasing personnel costs, and the ongoing expenses related to the UK’s nuclear deterrent—are likely to consume much of the newly allocated spending. Staffing costs are expected to rise, despite a reduction in the overall workforce, driven by last year’s public sector pay deal, an impending increase in employers’ national insurance contributions set to take effect in April, and the rise in the national minimum wage.
For instance, the latest report from the National Audit Office (NAO) regarding the MoD’s Equipment Plan highlights a projected shortfall of £7 billion for military equipment spending over the next two years. The MoD has insisted that these estimates, made in 2023 under Rishi Sunak’s administration, do not reflect the current government’s commitment to increasing defence spending by nearly £3 billion in 2025/26.
Savill pointed out that the current defence budget is under “considerable stress,” with the NAO report categorizing the MoD’s equipment plan as unaffordable. He warned, “If the plan isn’t effectively managed, a large portion of the increase might be consumed by overspending or necessitate significant cuts to capabilities or activities, or lead to substantial delays in procurement programmes to defer expenditures into later years.” He cited the early retirement of various capabilities in November 2024, which only yielded an estimated savings of £500 million.
Moreover, spending on the UK’s nuclear capabilities—including submarines and Trident missiles, along with the procurement and maintenance of nuclear-powered attack submarines and the disposal of decommissioned submarines—will likely continue to consume a significant and perhaps increasing share of the defence budget. Savill noted that with the ongoing construction of the Astute-class attack submarines alongside the new Dreadnought deterrent submarines, the Nuclear Enterprise has been allocated nearly £110 billion over the next ten years in the Equipment Plan alone: representing 38% of the overall plan and nearly 20% of total existing defence spending. He cautioned that if the current contingencies for the nuclear programme prove inadequate, it could adversely affect funding for conventional capabilities.
On the topic of personnel costs, Savill indicated that these are expected to rise even as the forces decrease in size, primarily due to the public sector pay announcement last year, which could add over £1 billion in expenses. Currently, service personnel account for approximately 20% of the defence budget, while civilian personnel represent about 3.5%, making it challenging to realize substantial savings in this area.
RUSI has also highlighted that higher national insurance contributions will need to be accommodated within the MoD budget, along with the increase in the minimum wage. During Prime Minister’s Questions on Wednesday, Conservative leader Kemi Badenoch pressed Starmer to confirm that the costs associated with the Chagos deal would not impact the defence budget. The Prime Minister responded, “The additional spending I announced yesterday is specifically for enhancing our capabilities in defence and security within Europe, as I clarified yesterday. The Chagos deal is of paramount importance for our security and that of the US. Once finalized, I will present it to the House along with the costings.”
Looking ahead, the Strategic Defence Review, slated for this spring, is expected to reflect the latest developments, particularly in light of Trump’s foreign policy shift, which demands that Europe increases its own security expenditures. A spokesperson for the Ministry of Defence addressed RUSI’s analysis of the equipment plan, stating, “These figures originate from the previous government and fail to account for this government’s commitment to increasing defence spending by nearly £3 billion in 2025/26, clearly demonstrating our dedication to national security and ensuring our military force is prepared for the future.” The spokesperson added, “The Prime Minister has announced the most significant sustained increase in defence spending since the end of the Cold War, with spending on defence projected to reach 2.5% of GDP by April 2027, with an ambition to achieve 3% in the next Parliament.”
