The Ministry of Defence is facing a shortfall of £28 billion over the next four years, according to reports. The warning was delivered personally by the chief of the defence staff, Air Chief Marshal Richard Knighton, to the prime minister, the chancellor and the defence secretary before Christmas.
At a time of international instability and signs of US disengagement from Nato, the shortfall is concerning. Whitehall struggles to keep up with rising defence costs and existing commitments, let alone new challenges. Cuts to certain projects are occurring even as budgets rise nominally, because defence is becoming costlier, especially advanced equipment. New considerations, such as potential troop bases in Ukraine and a focus on the Arctic, add to demands.
Part of the problem is the mismatch between what the armed forces are asked to do and the money provided. Prime Minister Keir Starmer had assumed the Strategic Defence Review was fully costed, but has now instructed defence secretary John Healey and ACM Knighton to produce a revised defence investment plan (DIP), due in March.
The £28bn shortfall is across four years, around £7bn per annum, against a current defence budget of £62bn. For context, the chancellor’s fiscal headroom is only about £20bn. Recent conflicts show new technologies like drones and cyber warfare are altering planning and procurement. Another issue is whether to rely on US weaponry or cooperate more with Europe.
Britain faces a revanchist Russia and a retreating America, with no new formal defence framework to replace Nato. UK military aid to Ukraine has been about £11bn since 2022, with a pledge of £3bn a year until 2030. The government committed to increase Nato spending from 2% of national income to 2.5% by 2027, and 3.5% by 2035, plus 1.5% on security-related investments – totalling 5%, more than doubling current spend without a clear plan.
If war with Russia is a risk, setting an absolute figure for defence spending may be stronger. Donald Trump has boosted the US defence budget to $1.5 trillion (over 5% of GDP). In Europe, Poland leads at almost 5%, Germany aims for 3.5% by 2029, while Spain lags at barely 2%. Russia devotes about 7.5% of GDP to the Ukraine conflict, but its economy is disproportionately small, meaning Europe can outspend the Kremlin if political will and capacity exist.
