Treasury yet to do due diligence on finding extra money for UK’s Nato spend
How to hit the 3.5% of GDP defence spending promise would be a matter for ‘the next prime minister’, MPs told The Treasury has as yet carried out no analysis of the trade-offs nece
By The Guardian
The Treasury has carried out no analysis of the trade-offs required to meet the UK’s new Nato defence spending commitment, leaving the funding of extra military expenditure to be decided by the next prime minister. This stark admission came during a joint session of the Treasury and defence select committees on Wednesday, where Treasury chief secretary Lucy Rigby repeatedly stated that the department has yet to perform the due diligence necessary to hit the 3.5 per cent of GDP target for core defence spending by 2035.
Under robust questioning from MPs, Rigby confirmed that while the government has pledged to reach the Nato target, the practical mechanics of how to fund the additional billions remain unexamined. The Treasury has not assessed which other areas of public spending would need to be cut or how the extra money would be raised without worsening the economic outlook.
This lack of preparation means the current administration has effectively deferred the hardest fiscal decisions to its successor, despite the commitment being made under Prime Minister Sir Keir Starmer’s leadership. The UK’s Defence Investment Plan, announced last week, pledges an extra £15 billion in defence spending over the next four years, a figure that surpasses the £13.5 billion previously proposed by former defence secretary John Healey.
However, this increase falls significantly short of the £28 billion that defence leaders reportedly requested to adequately address the threats facing the nation. Crucially, the plan states that one-third of this new spending is still unfunded, creating an immediate budget challenge that the likely next prime minister, Andy Burnham, will have to resolve.
Nato allies, including the UK, agreed last year under pressure from US President Donald Trump to boost defence spending to 5 per cent of GDP by 2035, with 3.5 per cent dedicated to core military spending and 1.5 per cent to security-related infrastructure such as roads and railways. While the UK is on track to reach 2.7 per cent of GDP on core defence by 2029, a significant gap remains to reach the 3.5 per cent target in 2035, and the plan does not include a specific timeline for bridging that gap.
Details on how to achieve the remaining increase are expected to be presented in the next spending review, scheduled for next year. Former Nato secretary general Lord Robertson has warned MPs that the UK government’s delay in finalising its defence investment plans has left Nato partners “troubled” and described the postponement as “unpersuasive”.
Robertson emphasized that the task of elevating military spending to address the threats confronting the UK is now “more significant, more urgent, and sooner than we had expected,” yet the current defence investment plan does not rise to the occasion. He reiterated a warning from April regarding the “dangerous complacency” the UK government has displayed towards defence, a sentiment he believes extends across the entire political leadership.
Prime Minister Sir Keir Starmer is anticipated to face mounting pressure to expedite defence spending during the upcoming Nato summit in Turkey, where he will meet with President Trump. Starmer has outlined that alongside Nato allies, the UK remains committed to reaching 3.5 per cent of GDP on defence by 2035, and he is expected to clarify at the summit that the UK’s commitment remains steadfast despite the funding uncertainties.
However, European countries are likely to struggle to hit the spending target, with the UK facing a “mountain to climb” to reach the 2035 goal based on current plans. The lack of Treasury analysis on trade-offs means that the government has not yet determined whether the unfunded portion of the £15 billion will be covered by cuts elsewhere, new borrowing, or tax increases.
This uncertainty creates a volatile fiscal environment for the incoming administration, which must now navigate the complex balance between meeting Nato obligations and maintaining economic stability. With one-third of the planned spending unfunded, the next prime minister will inherit a significant budget challenge that requires immediate resolution to avoid undermining the UK’s defence capabilities and its standing within the alliance.
As the Nato summit begins in Ankara, the debate is expected to shift from pledges to implementation, with scrutiny from the White House on whether Europe can turn bigger budgets into military power fast enough to keep President Trump engaged. The summit will examine procurement, industrial capacity, and support for Ukraine, all of which depend on the successful funding of the increased defence budgets.
The UK’s ability to meet its commitments will be a key test of its reliability as a Nato partner, especially as the alliance faces pressure to maintain support for Ukraine and adapt to a battlefield shaped by rapid technological development. The Treasury’s failure to conduct due diligence on the trade-offs necessary for the 3.5 per cent target leaves the UK in a precarious position, with the funding gap set to widen if no concrete plan is presented in the next spending review.
The next prime minister will need to wake the UK up to the threat of war and reassess defence spending levels to ensure the nation can meet its Nato obligations without compromising its economic health. Until the Treasury performs the necessary analysis, the promise to hit the 3.5 per cent target remains a political aspiration rather than a funded reality, with the hard decisions left for the future.