2.5% is a ludicrous target for defence spending

It's time to grow up and get serious.

They found him on the Island of St. Helena, two years into their voyage. Ten men from the Edward Bonaventure rowed to shore in a small boat, where they heard singing from a small chapel. Bursting through the main door they found a pale, naked Englishman, hiding from the sun, surrounded by the drying skins of forty goats. He had been alone for 14 months, and grew so hysterical on seeing other people that “he became distracted of his wits, to our great sorrow.” Realising that he needed clothes¹, they made him “two suits of goats’ skins with the hair side outwards, like unto the sausages of Canada².” They took the madman onto their ship, but he died by the time they reached the West Indies.

Sir James Lancaster was returning from an early English expedition to the East Indies - the Spice Islands - when his crew found the goat man. Three tall ships had left Plymouth in April 1591, but only one even made it to the Indian ocean. By the time they reached the coast of southern Africa their crews had been decimated by scurvy, and they were forced to send the Merchant Royal home with ‘diverse weak men’. Eight days later, the two remaining ships were struck by a hurricane. The horrified crew of the Edward Bonaventure saw “a great sea break over our Admiral, the Penelope and their light struck out: and after that we never saw them any more.”

Their own ship was struck by lightning which, “slew four of our men outright, their necks being wrung in sonder without speaking any word.” All of the remaining 90 men were injured, some stricken blind, others vomiting blood. Still they continued, alone, heading to the end of the known world. In the Indian Ocean they would battle pirates, famine, the Portuguese and the murder of thirty sailors before the mutinous crew turned back to the West, via St. Helena. Their return journey was catastrophic even by the standards of the outbound voyage, and in the end just 25 men returned to England, trickling home via an assortment of routes³ in 1594.

Future voyages were scarcely much better: the odds of returning home were often evens at best. The seas were dangerous beyond belief, as if every element - the wind, the waves, the people, the disease - had been honed to its most absurdly lethal form. But the prize - a hold full of precious spices, worth several fortunes in Elizabethan England - far outweighed the risks.

Photo by Vidar Nordli-Mathisen on Unsplash

Britain is a maritime nation of traders. There is no world, outside of the agrarian fantasies to be found at both ends of the political horseshoe, in which we are able to be both self-sufficient and wealthy. The commerce we rely on to maintain our standard of living is possible for three reasons: technology, medicine, and the projection of power. We are able to build ships that can cross oceans with ease, we are able to keep their crews healthy (or at least stop them constantly dying), and we are able to protect them by applying naval or diplomatic power wherever they travel around the globe.

We’ve been good at this for over four centuries, either working alone or in collaboration with a rotating cast of allies, most recently the United States and NATO. The dance of trade is so precise, so optimised, that any disruption to it has profound impacts. The British government had to spend around £40bn protecting households and businesses from the spike in energy costs triggered by Russia’s invasion of Ukraine. When the Ever Given blocked the Suez canal, the cost to the global economy was several billion dollars per week. These costs were inflicted without even really trying, so one can only can imagine what a concerted effort by a hostile power or powers could achieve.

Although it’s fashionable to pretend otherwise, our current way of life is only possible because we live inside a gigantic military bubble, and for decades much of that bubble has been provided - at huge expense - by the United States. It turns out that if another country is willing to pay for your defence, there’s very little incentive to spend serious money on it yourself, and so we, and our European allies, didn’t. But this situation was never sustainable - with the best will in the world, the U.S. can’t continue to prop up European lines while facing growing threats from an emerging superpower across the Pacific. Alliances require each member to play their part, and we haven’t.

The total unseriousness of British defence policy can be seen across decades of ‘strategic reviews’, almost all of which were immediately proven wrong, as painfully summarised by Ron Smith of the Economics Observatory:

For example, the 1981 Nott review, which planned to reduce the size of the navy, was followed by the 1982 Falklands war, where the task force relied on vessels that were due to be scrapped. Similarly, the 1990 ‘options for change’ review, which planned cuts in conventional forces, was followed by their use in the 1991 Gulf war. And the 1998 SDR was followed by the interventions in Afghanistan and Iraq, while the 2021 ‘integrated review of security, defence, development and foreign policy’ was followed by Covid-19 and the Russian invasion of Ukraine, and had to be refreshed in 2023.

What’s striking about this timeline isn’t that people failed to predict events - who could? - but that strategic plans were so fragile that they needed to predict events. Instead of asking seriously what capabilities are needed for the long term, the cold dead eye of the Treasury cast its penetrating beam over budgets and asked one question: “What can we get rid of? Ooh, we haven’t used that for a few years!”

Defence should be like an insurance policy - you have a reasonably comprehensive policy because you don’t quite know what’s going to happen. What successive governments have done is to strip out every individual part - fire protection, flood damage⁴, theft, contents - until the overall coverage is meaningless. Yes there was a peace dividend after the Cold War - the idea that John Major should have maintained spending at 5% of GDP in the 1990s is… bold - but we spent it multiple times over, despite facing genocide in Europe just a few years later, and three decades later we’ve still not woken up to the new reality, we’re still grinding along at ‘Hasselhoff straddling the Berlin wall’ levels of spending and denial.

Defence spending is expressed as a percentage of GDP, but this tends to obscure the actual amounts. Britain’s GDP is roughly $3.4tn, so 1% of that is about $34bn, or £27bn in proper British money. When Keir Starmer agonises about whether to spend 2.3% or 2.5% of GDP on defence, we’re talking about a difference of roughly £5bn. The government paid eight times that just to manage energy prices after Russia’s invasion of Ukraine. Meanwhile, as Keir Giles points out in the FT, Britain “lacks a comprehensive air defence system of the kind that enabled it to survive 1940”, and refuses to “countenance spending enough simply to maintain current capabilities.” In a world where diplomacy can be backed up with the threat of long-range missiles raining down from the Arctic, this simply isn’t good enough.

Even when we have the money, we’re terrible at spending it, as James Holland wrote recently:

Nothing can be built on time. Procurement projects sink under the weight of red tape, regulation, and catastrophic inefficiency. Joining the armed forces is largely unappealing due to the low wages, low morale, and the paring back of every aspect of military requirements and efficiency; there’s not enough kit, not enough ammunition, not enough aircraft, not enough ships, much of its day-to-day running is in the hands of private companies only interested in a profit. The purchasing of new helicopters two-and-a-half years ago, for example, was halted at the last moment because the MOD suddenly decided some competition was needed. It wasn’t. Two – foreign - firms who subsequently tendered for the contract then pulled out at the last minute, wasting valuable time, money an effort, and presumably had entered the bid in the first place only to undermine that of the original British firm. The RAF still doesn’t have any of these new helicopters.

Ukraine represents the nadir of this trend: unable to contribute in any meaningful way, Europe finds itself sidelined and irrelevant, scrambling for a voice it scarcely deserves, squabbling over fractions of percentage points as it fails to agree on any viable plan; its leaders facing the exquisite humiliation of realising that Trump of all people has made a point they can’t argue against. How dumb and short-sighted do you have to be to be in that position? Especially when you’ve had most of a decade since Trump 1.0 to prepare for it?

The challenge here is entirely political. People love to pretend that Europe is poor, but it just isn’t - its GDP is larger than Russia and China combined and not a million miles adrift of the US. The British economy alone is larger than Russia’s. Poland, with a smaller budget but seeing the danger more clearly than most from its position on the front line, has ramped up defence spending to 5% of GDP and is enjoying the resulting stimulus to its economy.

And yet the heads of the armed forces, the people who could and should be stretching the terms of debate and arguing the case for 3 or 3.5% or more - still far less than the 4-5% we were spending in the latter years of the Cold War - are trapped in such a Cheems mindset that the highest figure they can imagine to argue for is… 2.65%.

If Starmer is serious about putting boots on the ground in Ukraine, he’s going to have to back that up with a serious injection of cash, combined with a major shake up of procurement. He should be looking at common spending rules or mechanisms with European allies that could free up money for this purpose while reassuring markets. And who knows: investing in Britain’s armed forces and world-leading defence industries could be a good way of delivering some much needed growth at the same time, particularly if we can supply product to our rearming European neighbours.

Speaking of supplies, it’s not just defence spending that’s the issue. Britain and Europe need to think seriously about resilience in other ways: namely, resources and supply chains. We need reliable access to chips, steel, oil, food, medicines and energy among many other things. Our failure to build enough energy production is a national disgrace - Britain was a global leader in nuclear power as recently as the 1960s, but our ability to be self-sufficient - or hell, even an exporter - has been eroded by profoundly stupid thinking of the kind on display in the infamous clip below, starting around 7 minutes in, in which Nick Clegg patiently explains that building nuclear is pointless to solve our energy needs because the plants won’t come online until, er, the early 2020s.

The fate of chip makers or vaccine manufacturers along with our ability to produce abundant energy should be a matter of long-term national security, as much a part of our defence strategy as ships and tanks; and investment in any of these areas would benefit our economy at the same time. And yet somehow, astonishingly, there is still talk of European nations returning to Russian gas in the event of a peace deal.

The first responsibility of any government is to protect its people. Our failure as a nation - as a continent - to take this seriously is a multi-generational fuck-up and now an existential threat. Our government is quibbling about a 0.2% or 0.3% GDP change in the defence budget over several years. The leader of the opposition, presented with a golden opportunity to go hard on security, is ranting to weird Twitter conferences about DEI. European leaders are scrambling to agree on anything, while the German Chancellor complains that talk of a peacekeeping force to guarantee Ukrainian security is ‘premature’ three years into a ground war. To paraphrase Logan Roy: these are not serious people.

It’s time to grow up. Unless something changes pretty damned quickly we may find ourselves like that Englishman on St. Helena: stranded in the mid-Atlantic, naked, frightened, and alone.

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1. For their benefit as much as his, you suspect.

2. No idea.

3. To give just one example: Henry May, purser of the Bonaventure was shipwrecked off the coast of Bermuda with a French crew and had to build a raft to escape back to the mainland.

4. A sore point as our car got randomly flooded when a river burst its banks recently.