This is the only way to fix Britain’s defence conundrum
Labour needs to radically reimagine the country’s spending priorities after Trump’s Greenland threats. Jeremy Warner
07 January 2026 7:00am GMT
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Whatever the wider geopolitical and economic consequences of Donald Trump’s latest escapade in Latin America, there is one thing it has highlighted closer to home – the urgent need to put a rocket under UK defence spending.
This has been obvious for a long time now, but Trump’s actions and words over the past several days have made the matter more pressing still.
All pumped up by his initial success in Venezuela, Trump has repeated his determination to annex Greenland, by force if necessary. Via Denmark, Greenland is a part of the North Atlantic Treaty Organisation (Nato).
It is one thing to use the Monroe doctrine as justification for extending US influence in Latin America, but quite another to threaten a fellow member of Nato.
To do so must surely spell the end of this seventy-six-year-old post-war security arrangement, or at least its dependence on US participation.
For decades now, it has been possible to sustain the delusion that the era of hard power – or national rivalry pursued via military means – had given way to one of soft power, rules-based international order and trade diplomacy.
Something which, rightly or wrongly, the UK has prided itself on being particularly good at.
This may always have been a conceit, but its premise has also turned out to be hopelessly mistaken, and has left the UK and much of the rest of Europe badly exposed.
The big wake-up call was of course Putin’s invasion of Ukraine. Subsequent events have further hardened the view that Europe is now essentially on its own, spelling the end of the so-called “peace dividend” of the post-cold-war era.
Since 1989, marking the end of the cold war, UK defence spending has fallen from 4pc of GDP to 2.3pc last year.
These savings have supported substantial growth in health and welfare spending. A similar pivot was seen throughout much of the rest of Europe.
At a summit in The Hague last year, Mark Rutte, Nato’s secretary general, successfully pushed for a Nato-wide target for defence spending of 5pc of GDP.
He urged Europe to adopt a “wartime mindset” in its spending and industrial planning.
This was a good start, but leaves unaddressed the far more important question of how major European economies – with defence budgets squeezed by the rising health and welfare spending – could plausibly get from here to there.
Not least in the UK, where Starmer’s Government has adopted some relatively ambitious targets for defence spending, but with little or no plan as to how these targets might be met.
The initial uplift to 2.6pc of GDP by 2027 is expected to be paid for via a similarly sized cut in the overseas aid budget, but is scarcely enough merely to stand still, with much of the extra money already earmarked for rebuilding artillery stocks depleted by the war in Ukraine and for upgrading dilapidated military housing.
As for how to pay for the hard yards of subsequent targets – 3.5pc by 2035 – answer comes there none. As it is, the target is at least two general elections away, making it impossible to hold the current Government to account for failure to meet it.
Poland, Denmark and the Baltics have already managed a similar scale of increase in military spending, and Germany is well on the way, so it is not beyond the bounds of capability.
But all these countries are in a much stronger fiscal position than the UK, and can therefore easily borrow what’s needed. This is not true of Britain, France and Italy, all three of whom are dragging their feet.
What’s more, the last time UK defence spending was at the level now targeted, spending as a proportion of national income on both health and pensions was much lower.
Today, the cost of the state pension is 5pc of GDP, projected by the Office for Budget Responsibility (OBR) to rise to 7.7pc by the early 2070s if nothing is done to curtail triple lock upgrades.
Similarly with health and social care spending, where the pressures of an ageing population are expected to push up costs to around 9pc of GDP by 2035.
In one particularly scary scenario explored by the OBR, the increased prevalence of chronic conditions could cause health spending to almost double from 7.9pc of GDP in 2024-25 to 14.5pc of GDP in the 2070s.
If nothing is done to change course, the OBR projects, the national debt will rise to 270pc of GDP by the early 2070s.
It scarcely needs saying that this won’t happen in practice if only because bond markets would prevent it; some kind of fiscal crisis would step in to ensure painful corrective action would be taken well before then.
But it gives a measure of the choices that will have to be made by future governments in meeting the country’s defence needs.
Either these can be taken voluntarily or will eventually be forced on policymakers by financial markets or the International Monetary Fund. Something, somewhere will have to give.
In theory, the extra defence spending could be met by further increasing taxes – around £500 a year per person in today’s money to meet the 2035 target, according to the Institute for Fiscal Studies.
But already the Government is hitting the law of diminishing returns on a rising tax burden. Besides, significant further tax rises are already scheduled just to meet current spending commitments.
Bottom line, a radical re-imagining of spending priorities is approaching at pace. The obvious target here has to be welfare – and particularly working-age benefits – where spending is plainly out of control.
Simply returning these expenditures in real terms to where they were five years ago before the pandemic would save more than enough money to cover the entire targeted increase in defence spending. But this is easier said than done.
Indexation of benefits through the past several years of well above target inflation accounts for only part of the surge in the costs of working-age welfare, and in any case is very hard to put back in the bottle once let out.
The much greater damage comes from an increased caseload. I’ve yet to see a plausible plan for reducing the numbers from any political party, including Reform, let alone Labour. Meaningful welfare reform has run into the sand.
One way or another, the issue nonetheless has to be faced. The triple lock tends to bear the brunt of the criticism over unsustainable welfare spending.
However, the much more troubling problem is the growing number of young people not in employment, education or training (Neets).
We are in danger of creating a lost generation. Diverting the resources spent sustaining this scandalous state of affairs to the sadly neglected task of defending the nation’s borders is the obvious way to go.
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