Fact check: Government plans will see defence spending hit 2.5% of GDP
It is unclear what the Prime Minister is using to claim that the increase would be £13.4 billion per year.
Prime Minister Sir Keir Starmer said his new plan would mean spending £13.4 billion more on defence every year from 2027.
In the House of Commons on Tuesday, he said: “We will deliver our commitment to spend 2.5% of GDP on defence, but we will bring it forward so that we reach that level in 2027 and we will maintain that for the rest of this Parliament.
“Let me spell that out. That means spending £13.4 billion more on defence every year from 2027.”
Evaluation
It is unclear how that exact figure has been arrived at. It appears to compare defence spending in 2027/28 directly with spending today. But that ignores the fact that defence spending would have increased anyway because the economy is forecast to grow.
After taking into account the amount that spending would have risen anyway, the new plans increase defence spending by a little over £6 billion per year.
The facts
Asked about his statement the following day at Prime Minister’s Questions, Sir Keir said: “If you take the financial year this year, and then you take the financial year for 2027/28, the difference between the two is £13.4 billion.”
Where has the £13.4 billion figure come from?
The UK currently spends around 2.3% of its gross domestic product (GDP) on defence, this is set to rise in Sir Keir’s plan to 2.5% by 2027. When contacted, the press office at 10 Downing Street said that this would mean that defence spending would reach £79.7 billion in the year 2027/28 fiscal year, compared to £66.3 billion in the 2024/25 fiscal year. Therefore the difference is £13.4 billion as Sir Keir said.
But it is unclear where Downing Street got its figures from. The press office did not have a detailed breakdown of the source and referred to the Treasury, which has not responded at the time of writing.
Office for Budget Responsibility (OBR) figures from October 2024 forecast that Gross Domestic Product (GDP) would be £2.8818 trillion in the 2024/25 fiscal year. When taking 2.3% of that, it gives £66.28 billion for defence spending, which matches the figure provided by Downing Street.
However the OBR data then shows GDP growing to £3.2222 trillion in the 2027/28 fiscal year. When taking 2.5% of that it leaves £80.55 billion for defence, not £79.7 billion. That would mean that the increase in cash terms between today and 2027/28 is £14.27 billion.
If using 2.475% of forecast GDP in 2027/28 it produces the £79.7 billion figure. That percentage can be rounded to 2.5%.
These numbers are using the figures for Nominal GDP (£ billion, non-seasonally adjusted) in sheet 1.4 of the OBR’s spreadsheet.
Is this a legitimate way to calculate the increase?
As we do not know exactly how the Government arrived at those figures, it is difficult to say how legitimate Sir Keir’s figure is.
Asked about the figure by the BBC, Defence Secretary John Healey said: “That’s a cash number, if we were increasing it in real terms, taking in inflation, it would be something over £6 billion.”
If defence spending remained at 2.3% of GDP, then the OBR’s figures would imply an increase to £74.11 billion by the 2027/28 financial year, even without the new policy. This is simply because GDP is expected to increase.
That would mean that the new policy has only added £6.44 billion to defence spending in 2027/28 compared to what would otherwise have been the case without spending being cut as a proportion of GDP. That is – as mentioned above – £14.27 billion more than today’s spending.
Of course GDP forecasts are uncertain and subject to change, so the final figures are likely to be different.
Ben Zaranko, an economist at the Institute for Fiscal Studies (IFS), said he was also “unable to replicate” the £13.4 billion figure that the Government has supplied.
