The “welfare versus defence” framing oversimplifies the difficult trade-offs

Lord Robertson’s attack on the government’s “corrosive complacency” towards defence came with a proposed solution; the former Labour defence secretary, along with two former Conservative defence secretaries, suggested that increased defence spending should be paid for by cuts to welfare.  

However much the government decides to spend on defence, it is not helpful to present the current choice in these simplistic terms. The post-Cold War peace dividend has largely been diverted into spending on social programmes (most notably the NHS), but increasing the defence budget now would require difficult trade-offs across the breadth of government tax and spend.

Rising ambition on defence spending has not been matched by funding plans

There has been a ratcheting up of ambition on defence spending in recent years. First, in April 2024, Rishi Sunak said he wanted defence spending to reach 2.5% of GDP by 2030. In February last year Keir Starmer brought this forward to 2027/28, as part of an ambition to reach 3% by 2035. And then, at a NATO summit just two weeks after the MoD’s budget was allocated at June’s spending review, the prime minister upped this to 3.5% by 2035.  

The OBR have said that reaching 3.5% of GDP on defence in 2035 will cost an additional £40bn in today’s prices. These are huge sums of money – equivalent to almost two thirds of the schools budget, and more than the Home Office and Ministry of Justice budgets combined. Accommodating such a large increase will likely require reprioritisation across the breadth of government policy. But to date, the government has set out neither plans for ramping up spending during the next couple of years to begin reaching this target, nor an indication of how large increases would be funded after the spending review period.

The Defence Investment Plan, supposed to follow hard on the heels of the Strategic Defence Review of which Robertson was a co-author, is still sitting in the prime minister’s pending tray. Reporting suggests that Rachel Reeves has proposed increasing defence spending by less than £10 billion over the next four years, set against warnings from defence officials about a £28bn funding gap over the same time period.  

Welfare spending is easy to point at, but hard to grip

Welfare is an easy target for defence hawks – but both parties in government have found it hard to deliver cuts in practice. The Conservatives have said they would pay for extra defence spending by reinstating the newly abolished two child limit, but that does not come close to matching the increases proposed.  

The biggest items in the welfare budget are the state pension (£146bn) and health and disability benefits (£77bn). Raising an extra £40bn by 2035 from welfare would likely require deep cuts to one or both of these. The government would also have to consider knock-on effects on wider public services. This would be politically difficult. So far, the government has struggled to stand-up to backbench pressure over much smaller cuts to winter fuel allowance and PIP, which together were calculated to be worth less than £6bn in 2030.  

When Starmer increased defence spending in February 2025, he cut the aid budget by an equal amount. This decision was made easier by not specifying where cuts would fall, and by the fact that the short-term consequences would be felt by people outside the UK. Credible cuts to cash benefits, on the other hand, would require the government to be more specific and would directly affect some of the most vulnerable people in the UK.  

Increasing defence spending will likely require government to look beyond welfare cuts

Spending reviews and fiscal events are the best times to make comprehensive trade-offs about levels of tax and spend – and last year’s spending review should, ideally, have been used to allocate funding to deliver on the findings of the Strategic Defence Review. But if government thinks defence spending must urgently rise and be prioritised, the publication of the Defence Investment Plan should not wait until the autumn budget or next year’s spending review. Delaying this decision – and failing to provide certainty to the MoD and key supply chains – has a cost.

For the Defence Investment Plan to be credible, however, it must come alongside a firm commitment to explain how it will be paid for come the autumn budget. It is highly unlikely that the defence funding gap can be filled through welfare savings alone, but if welfare reform is to play a big part in boosting defence spending then the government should use the coming months to work out – drawing on the upcoming Timms and Milburn reviews – what it wants the welfare system to achieve, and what that means for spending.

The unavoidable trade-offs Starmer faces will likely require all of tax, welfare and the overall departmental spending envelope for spending review 2027 to be on the table. If the prime minister announces a big increase in defence spending before the Autumn, then he must both make the case for why this is the right decision, and level with the public about what this will inevitably mean for the tax burden, public service performance and living standards.