Sunak suggests he won’t ‘shy away’ from cuts to lift defence spending
Rishi Sunak has suggested he will not “shy away” from further public spending cuts to raise defence spending as he faced questions over how the policy would be funded.
He said the plan would not affect the government’s ability to cut taxes and was the “right thing to do” in an increasingly dangerous world.
Sunak has committed to spending 2.5% of GDP on defence by 2030. However, the government’s numbers have faced scrutiny from economists who have warned they would lead to bigger spending cuts in other areas.
Asked at a press conference in Berlin whether his defence increase will mean tax rises and deep cuts, he said that was “not a fair characterisation”.
“We have made a choice and I am not shying away from that choice,” he said. “All governing is about prioritising. I have decided to prioritise defence because I think that is the right thing to do for our country.”
Sunak said investment in the NHS and schools – which along with international development are protected areas – was “not going to change”.
He insisted the plan, which would cost £4.5bn a year by 2028-29, was fully funded and has already ruled out any increase in borrowing or debt to pay for it. Of the increase, £1.6bn will come from an increase in R&D funding for defence, although it was unclear which department would miss out as a result.
The remaining £2.9bn will come from a reduction in the civil service headcount to pre-pandemic levels – a 70,000-person reduction. “It is a completely funded plan,” he told reporters. “We have got a very clear idea of how to reduce civil service headcount, which has grown considerably over the last few years …
“And alongside that, continue to invest in public services and cut people’s taxes.”
The prime minister has faced scepticism from economists over the cost of the commitment, which would take defence spending from approximately £73.8bn a year to £78.2bn.
The 2.5% target would only be reached in 2030-31, which is beyond the horizon of official fiscal forecasts, meaning another £2.5bn a year will need to be found from 2028-29.
Yesterday, the defence secretary, Grant Shapps, struggled to explain how the spending uplift would be funded. “We’re simply saying that defence of the realm is the absolute number one priority; it comes before everything else and if we don’t defend the nation, then everything else becomes slightly less of an issue,” Shapps said after noting it was “reasonable” to cut 72,000 civil service jobs.
When it was suggested on Nick Ferrari’s LBC programme that this would not fully fund the increase in defence spending, Shapps said: “No, but it will pay for a large chunk. We’re making other changes to the way that, for example, we use our research and development budgets … you can imagine getting this past not just the chancellor but essentially two chancellors because the prime minister has said every penny of it has to be properly accounted for.”
Paul Johnson, director of the Institute for Fiscal Studies, said: “The overall spending ‘envelope’ was set in the budget, and hasn’t been adjusted. With no more spending overall (and no tax rises) that can mean only one thing: bigger spending cuts elsewhere.”
He criticised the government’s numbers as “impenetrable, misleading and internally inconsistent”, suggesting its defence spending claims were “overblown”.
Torsten Bell, director of the Resolution Foundation, said the government’s spending plans, even before the defence announcement, were based on huge cuts to future public spending that most economists thought were undeliverable. He added: “The degree of fiscal commitments, fictions being built up for after this election is a real problem.”
Sunak’s defence commitment could prove to be purely academic if Labour, which has said it wants to see a fully funded plan to reach 2.5% of GDP, wins the next election.
After his meeting with the German chancellor, Olaf Scholz, Sunak said it was “entirely reasonable” for the US to call for more European defence spending. The current Nato target for defence spending is 2% – though only 11 members of the alliance met that goal in 2023.
The government wants that benchmark to increase to 2.5%, which would add £140bn to the Nato budget if met by all 32 members.
Unusually among world leaders, Scholz declines to exchange gifts with visiting dignitaries. Sunak had travelled to Berlin from Poland, where Donald Tusk had given him a painting of Gdańsk, where the Polish prime minister had been a student activist in the late 1980s. In return, Sunak gave him a photo of Margaret Thatcher on a visit to shipyards.