Military spending should be front and centre

There are so many challenges facing Rishi Sunak as he prepares to deliver his Spring Statement that a lesser man would be daunted. Out of control inflation and an explosion in costs is one screamingly urgent issue: the Chancellor appears to have a rabbit in his hat to tackle the cost of living crisis. It won’t be enough, as nothing can be, but we must hope that he has the courage to be radical, as Britain faces its greatest squeeze on living standards since the 1970s.

Immediately aligning and increasing the personal allowance for both income tax and national insurance contributions to £12,500 would be one solution he may find palatable and sympathetic.

The need to plan properly for a massive nuclear roll out is another hill to climb: the Treasury has been dragging its feet on this for years, or seeking to delegate what little programme it was willing to commission to foreign stateowned enterprises, an error that will be remembered as perhaps that institution’s greatest since the ERM crisis. Boris Johnson is rightly running out of patience on this, though he should also take heed of Oliver Dowden’s advice no longer to allow net-zero dogma dictate policy. We need a dramatic acceleration in the provision of nuclear energy in the UK: it is the only way we will address the question of energy security while also ensuring that the lights (and electric cars) don’t go out when the wind fails to blow and the sun forgets to shine.

Defence spending is another such issue, albeit one that the Chancellor will unfortunately wish to delay acting upon for now. This extra outlay, when it does come, must not be accompanied by higher taxes or higher borrowing. As Duncan Sandys observed in the first major defence review conducted after the Second World War, in 1957, the economic vitality of the nation is itself a security matter. Tax raids weaken growth, undermining our influence. Extremely tough choices lie ahead, with a need to spend less on the welfare state, on bogus levelling up projects and on fanciful grand projects such as HS2.

But in this atmosphere of new realism, military spending has to rise. This does not need to mean a massive jump in personnel, though the current plan to reduce strength by 10,000, at a time when we are bolstering Nato presence in eastern Europe, looks presumptive. Over five years, our Navy surface fleet is predicted to become smaller than Italy’s, our Army the smallest in 200 years. Such errors need to be reversed, but our new post-Ukraine defence settlement needs to be rational, modern and contemporary. Cyber security and intelligence are key. The new approach must build on the defence review and the new strategy must include a massive reform of procurement to halt waste, the misallocation of resources and the never-ending pursuit of flawed priorities. Spending needs to rise to 3.5 per cent of GDP, which means cutting other forms of expenditure by almost 1.5 per cent of national income.

Sandys set two patterns: first, the tendency to see defence as a financial burden, with each period of detente offering the chance to raid the pot, and second, a habit of recalibrating towards today’s threats without keeping options open to the future. The Macmillanites gambled much on the nuclear umbrella. Wilson’s Labour Party withdrew east of Suez. Margaret Thatcher, initially, favoured enormous naval cuts – on the assumption that support for Nato in Europe was paramount. The invasion of the Falklands was a rude awakening, and the Thatcher Government pragmatically reversed course and raised spending to its highest point in real terms in decades. This contributed to the military-technological pressure that compelled Perestroika and, eventually, the collapse of the Soviet

Union: in that instance, one didn’t have to fire a shot to win.

What followed in the 1990s was a hastily sought peace dividend, the budget slashed drastically, with the stated aim of creating a smaller, more agile force. The Yugoslav wars immediately contradicted the End of History narrative; New Labour aggressively projected force even when, as in Iraq, it discovered its personnel were under-equipped. The general direction of our forces, smaller if more high-tech, was contradicted year after year by the missions they were asked to take, and even the Coalition and Tory Governments, while trying to rebuild the military, have hewed to assumptions about the future of warfare that exclude great power conflict (minus nuclear weapons). Ukraine blows this out of the water.

The West has been galvanised by Ukraine, creating new opportunities for moral and material rearmament. The Chancellor has a great deal on his plate, but he will need to find the time to map out a plan to sustainably increase spending on defence while making sure that our historically high-tax burden begins to fall noticeably as a share of GDP.