IFS Zooms In: The Economy Why is defence spending rising?
Sep 26, 2025
In this discussion, Matthew Savill, Director of Military Sciences at RUSI, and Max Warner, Senior Research Economist at IFS, dive into the implications of the UK's surge in defence spending. They examine historical trends, detailing the shift towards investment and the pressures of modernization. The guests debate whether this increased funding is a response to military needs or merely accounting adjustments. They also tackle how such spending might affect economic growth and the potential fiscal ramifications of committing to 3.5% of GDP for defence.
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Avoid Treating Defence As A Growth Panacea
- Don’t assume defence spending alone will spur large economic growth; consider funding method and trade-offs.
- Prioritise R&D spillovers and exports where defence spending can plausibly boost growth.
R&D Is Small But Critical For Military Edge
- MOD R&D is vital because military systems must work reliably under lethal conditions.
- The UK excels at research but struggles to sustain small-scale funding to mature innovations into service.
3.5% Would Be A Large Reallocation
- Hitting 3.5% (~£36bn) is substantial — roughly equal to current Home Office + MoJ spending.
- Reaching 1980s defence share matters against increased future health and welfare demands.