Defence: 2.5% GDP Spending Commitment

Thursday 14th November 2024 Lords Chamber

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Monday 11 November.

“The Government have a cast-iron commitment to spending 2.5% of GDP on defence. We promised it in our manifesto at the election, the Prime Minister promised it at NATO in Washington in July, and my right honourable friend the Chancellor promised it in the Budget two weeks ago, as well as announcing a £3 billion boost for defence spending next year to start to fix the foundations of our Armed Forces. That, of course, is on top of £3 billion each year for Ukraine. I remind the House that the last time this country spent 2.5% of GDP on defence was in 2010, with the last Labour Government—a level not matched in any of the 14 Tory years since.

Everyone agrees that defence spending must increase to match and deal with the threats we face. One of our very first acts as a Government was to launch the strategic defence review, which is working at pace to look at the threats we face, the capabilities we need and the resources we have available. It is not just about how much we spend but about how we spend it. The Prime Minister said at NATO that our plan in the SDR will come first, and then we will set out the pathway to spending 2.5%. The Chief Secretary to the Treasury said yesterday that this will come in the spring.

Today is Armistice Day. At the 11th hour, I had the honour of laying a wreath at the Cenotaph. Today is a reminder of what is at stake in this new era of insecurity; a reminder that our dedicated service men and women, around the clock, around the world, work to keep us safe; and a reminder of the ultimate sacrifice that so many have made in the past so that we may live in freedom today. We will remember them.”

11:51

[Baroness Goldie (Con)]

My Lords, the Prime Minister and the Chancellor’s continuing dithering on when the Government will spend 2.5% of GDP on defence has caused stasis in the MoD, which does not know what it can spend and when, a stagnation of the order book and disgruntled industry partners. What orders are currently being withheld, what is their value and to what extent are other customers overtaking the United Kingdom in the queue for supplies?

[The Minister of State, Ministry of Defence (Lord Coaker) (Lab)]

I do not agree with that caricature of what is happening. The Chief Secretary to the Treasury said at the weekend, and it has been repeated since, that we will reach 2.5% at a future fiscal event in the spring. The defence review is looking at what capabilities we need and we will then set that in the context of the 2.5% as we move forward. That sequencing is the proper way for us to go ahead. As it stands, no major projects are being disrupted as a result of the review.

[Baroness Smith of Newnham (LD)]

The Minister’s answer was very clear, but at the weekend the Chief Secretary to the Treasury suggested that the Government were waiting for the SDR to report. However, one of the provisions of the terms of reference of the SDR is that there is a cap of 2.5%. Who is setting the agenda—the SDR or the Treasury—and should we be worried?

[Lord Coaker (Lab)]

Of course the Treasury sets the context of the budget within which defence operates. The 2.5% commitment is cast-iron; the discussion is about the timeframe. The Chief Secretary to the Treasury announced at the weekend that the 2.5% will be announced at a future fiscal event in the spring. The sequencing is everything. If we decided to spend billions of pounds on a project now and the defence review suggested that that was not the best use of money to meet future threats, the noble Baroness would be asking me why we had spent the money before knowing what those threats were.

[Lord Stirrup (CB)]

My Lords, the Minister knows that defence requires 2.5% of GDP now if it is to avoid cuts in capability and will require even higher spending in future. When the men and women of our seriously underresourced Armed Forces are required to confront the increasingly perilous situation in Europe and beyond over the next decade and their lives are on the line, how much consolation does he think they will take from repeated protestations about a £22 billion black hole?

[Lord Coaker (Lab)]

The noble and gallant Lord raises a serious point. The Government have given a cast-iron guarantee to reach the cap of 2.5%. As he knows, I meet the forces all the time, and I would give them the reassurance that we are seeking to ensure that they have the capability they need to meet the future threats that will be identified by the defence review. We make that commitment.

[Lord Reid of Cardowan (Lab)]

Does the Minister agree that the elevation of the President-elect of the United States, who, among his many unpredictabilities, has at least one predictability—that he will insist that Europe pays more towards the defence of the West than it has done hitherto—makes it only more important that we take the lead in Europe by implementing the 2.5% at a minimum? Would that not also help us in our relationship with the incoming presidential Administration of the United States in, to put it crudely, a transactional manner?

[Lord Coaker (Lab)]

I thank my noble friend for his question. As he knows, we can say to the President of the United States that we will meet the cast-iron 2.5% commitment and will set that out in due course. We understand that European countries need to increase their defence spending; 23 of the NATO nations are now spending 2.5%, so that is a very real commitment. The American President will also be pleased to hear that this country is leading a carrier strike group into the Indo-Pacific—as we know, China is of particular interest to the incoming President as well as the current one. We will work with them to deliver that capability.

[Lord Robathan (Con)]

My Lords, there is already a bloody war being waged on the continent of Europe. Putin is waging war on us through cyberattacks and Litvinenko, the Skripals, et cetera. Does the Minister, for whom I have a great deal of respect, agree that 2.5% is not enough?

[Lord Coaker (Lab)]

The Government have made a commitment to 2.5%; the previous Government made a commitment to 2.5% by 2030. We will see what happens, but we commit to look at the 2.5% at a future fiscal event in the spring. We also want to ensure that we have the capability to meet the threats we face. Let us be clear about this: the UK is the leading nation in Europe, along with the United States and our European allies, standing up against Putin’s illegal invasion of Ukraine. The message needs to come from this Chamber that this country will stand with Ukraine for as long as it takes to deter Russian aggression.

[Lord Alton of Liverpool (CB)]

My Lords, even in advance of the strategic defence review, the noble Lord, Lord Robertson, has made it clear that we face a deadly quartet of China, Russia, Iran and North Korea. Yesterday we discussed with representatives of the Republic of Korea who were in London the opportunity of reaching some of the 10,000 North Korean soldiers now in Europe to fight in Putin’s war. Will we redouble our efforts to reach over the heads of the despotic leaders in North Korea to break the information blockade and encourage those soldiers to walk to freedom in the West?

[Lord Coaker (Lab)]

The noble Lord makes a very important point. I was in the Republic of Korea recently to talk about the importance of hybrid warfare and information wars. We must consider that fully when we get the defence review and ensure that our hybrid capability is a match for anybody’s. That involves trying to influence others opposing us at the present time.

[Lord Bridges of Headley (Con)]

My Lords, according to the OBR, if the Government were to meet their ambition to increase defence spending to 2.5% of GDP by the end of the Parliament, they would break their new debt rule. Which is more important: the 2.5% target or the debt rule?

[Lord Coaker (Lab)]

I am not a Treasury Minister, but I know as a Defence Minister that 2.5% of GDP is an absolute commitment. I hope the Treasury is successful, because if we get the growth in the economy that we want, that 2.5% will be of a much larger amount.

[Lord Craig of Radley (CB)]

My Lords, the defence review is due to report early in the new year. If that is the case, it will report before the figures on the years affected by the 2.5% increase are announced. Does that not make the whole defence review unbelievable, because it will not have the figures to hand?

[Lord Coaker (Lab)]

I thank the noble and gallant Lord for his question. As I suggested in an earlier answer, the sequencing of all of this is extremely important. Of course, we need the defence review, which is taking place within the context of the 2.5% budget figure that the Treasury has set. As I said, we will make an announcement about the pathway to that and how we intend to reach that point at a future fiscal event in the spring. The noble and gallant Lord is right to point out the importance of sequencing.

[Lord Soames of Fletching (Con)]

My Lords, were any instructions or guidance given to the SDR team on guarantees about the financing of what will inevitably be the findings of the SDR?

[Lord Coaker (Lab)]

The SDR team know the context within which they are working, which is the 2.5% envelope. There will be choices in that, and they will lay out those choices. It will then be a matter for consideration and decision following that. Laying out the threats for us to properly consider what they are and how we meet them is an important function of the SDR.

[Lord Dannatt (CB)]

My Lords, is the Minister aware that in 1935 we were spending less than 3% on defence? We failed to either deter or appease Hitler. Is he further aware that, in 1939, when the war had broken out, our defence spending rose to 19% and in 1940, when we were fighting for our lives, it was 46%? That is the disastrous cost of fighting a war. Does he agree that we must do all we can to prevent history repeating itself?

[Lord Coaker (Lab)]

I completely agree. The noble Lord will know that at various conferences and in various decisions I have made I have talked about the importance of deterrence. That has to be at the forefront of our minds as well.

[Viscount Trenchard (Con)]

My Lords, will the Minister answer more clearly the question from the noble and gallant Lord, Lord Craig of Radley, about sequencing? It seems to me that the noble Lord, Lord Robertson, cannot conduct his strategic defence review if he does not know the date by which 2.5% will be available to him. The Minister also said that we are second to the United States as a spender in support of NATO. However, this year Germany will spend £30 billion more than the United Kingdom on defence.

[Lord Coaker (Lab)]

What I meant about the UK’s position is that, when I visit European countries and go around the world, the UK is seen as one of the foremost leaders with respect to the military. The noble Viscount may point to Germany and its spending, but I am just saying that, in terms of leadership on Ukraine and the deterrent effect we provide, the UK is at the forefront.

I have answered the question from the noble and gallant Lord, Lord Craig, and others. The defence review team know the context in which they are working. The review will identify the threats and choices we have. As a consequence, at a fiscal event that we expect in the spring, we can then make decisions about the choices before us.

Let me finish with this: nobody should be in any doubt, as the noble Viscount knows, over this country’s determination to ensure that our Armed Forces are supported and given the equipment that they need to both deter those who seek to undermine us and be there to fight where necessary.