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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Mercurial Donald Trump may be, but he has a gift for shifting the debate. And sometimes, he is right. When it comes to defence spending, the only surprise is how long Europe’s Nato members have managed to freeride on American taxpayers.
Europe is rearming, and not only because of the fear that Trump will call for members to spend 5 per cent of GDP on defence at Nato’s June summit. Russia’s nuclear rhetoric, cyber attacks, the sabotage of undersea cables in the Baltic Sea and China’s vast new military command centre demonstrate that, as Ursula von der Leyen, European Commission president, said last year, “the world has got rougher”.
Russia’s neighbours have been upping their game for some time. Poland’s military outlay is already 4 per cent of GDP and its armed forces are now the third biggest in Nato. In Sweden, every household recently received a government leaflet, “In Case of Crisis or War”, advising on emergency evacuation and how to store food if power fails.
In Britain, the threat still feels remote. The government refuses to say when it will meet its target of raising defence spending from 2.3 per cent to 2.5 per cent, fearing unpopular deep cuts elsewhere. But time is not on its side.
The UK still has a good story to tell. Our special forces, our intelligence services and our nuclear deterrent are a strong card for London in its relationships with Brussels and Washington. We play a leadership role in the Joint Expeditionary Force of northern and eastern European Nato members, we provide nuclear attack submarines to Australia through the Aukus partnership with the US and we are part of the Global Combat Air Partnership to build a next-generation warplane, with Italy and Japan.
Without commensurate funding, however, these involvements accelerate overstretch. Defence experts repeat the phrase “hollowed out”. Britain is relying on shiny totemic kit — its aircraft carriers and Trident — to project a level of underlying muscle that it no longer has.
Even the 2.3 per cent is not quite what it seems, since it includes pensions. New “hunter killer” submarines have been stuck in port because of a lack of repair docks. General Sir Patrick Sanders, former chief of the general staff, has warned that Britain is no longer capable of launching the kind of operation it did in southern Iraq in 2003. The defence select committee complained a year ago that it could not even adequately judge Britain’s readiness, because the Ministry of Defence is so much more secretive than Nato allies.
Prime Minister Sir Keir Starmer is waiting for the strategic defence review in the spring. The reviewers include Fiona Hill, a former White House adviser once described by Trump as “a deep state stiff with a nice accent” (she hails from County Durham). Hill knows better than most that Trump takes a maximalist position. Her memoir quotes the president, in his first term, complaining that advisers who criticised his threats to leave Nato were “ruining my leverage”.
But even if Trump settles for more like 3.5 per cent, the UK is still in a fix. Starmer needs to decide, now, what spending envelope to give the reviewers. Some Labour backbenchers have warned that dithering is a grave mistake. Not all MPs or voters would support cutting transport, say, to fund defence. But few would want to see Britain let down Ukraine, after all we have done.
Britain now faces an existential question: are we going to remain a serious player or be exposed as a Potemkin power, talking a big game while resources dwindle? There is always disagreement behind the scenes on whether we should be fighting “the last war” or the next one. But the experience in Ukraine suggests winning requires both cutting-edge technology and conventional weapons, not one or the other. And that mass matters: in terms of troops, tanks and artillery. The ceasefire envisaged by Marco Rubio, US secretary of state, is likely to require America’s European allies to help maintain a frozen zone between Ukraine and Russia, perhaps for some time.
There are always tensions, too, between the different armed services. But without a bigger fiscal envelope, it is unlikely that Britain can continue to be a serious player on both land and sea.
The fiscal constraints make this a hellish situation for the government. Chancellor Rachel Reeves didn’t mention defence this week in her speech on growth, but it is a core part of the industrial strategy, and rightly so. Although the ministry of defence does not publish a complete analysis of where it sources weaponry, we know that parts of the F-35 fighter jets are being made here. The Typhoon weapons system, according to BAE Systems, has contributed £1.4bn to the UK economy in export sales. The industry supports an ecosystem of suppliers which contribute to regeneration.
Behind the scenes, there has been lobbying for both London and Brussels to exempt defence from fiscal rules on national security grounds — this seems unlikely to appeal to Reeves.
But there is yet another challenge brewing, from calls to boycott the defence industry. In 2020, the Supreme Court over-ruled the then Conservative government’s attempts to stop the Local Government Pension Scheme divesting from defence, after an action brought by the Palestine Solidarity campaign. A number of local authorities have dumped defence stocks.
Successive governments have performed a delicate dance of the veils on defence, trying to maintain prestige while fudging resources. But now the music has stopped. The decision that Reeves and Starmer make in the coming months will have an impact on the UK’s alliances, our perceived position in the world, and our perception of ourselves.
