Britain will target defense spending of 3% of gross domestic product by 2030, but Chancellor John Healey left the funding route for a spending review next year, keeping the cost beyond the immediate Budget unresolved.
Healey told Parliament on Oct. 28 that the review would explain how the government plans to meet its 2035 NATO commitment. Britain aims to spend 3.5% of GDP on core defense by then. That figure is part of NATO’s broader 5% investment goal, which includes up to 1.5% for wider defense and security-related spending. Britain’s earlier procurement targets and 3.5% commitment were set out alongside its defense plans.
The Office for Budget Responsibility (OBR) projects the defense share at 2.7% of GDP in fiscal year 2029-30, then 3.0% in 2030-31 and 3.1% in 2031-32. Those are fiscal-year projections; the government’s target date is 2030.
The Budget also addresses a separate £4.7 billion shortfall in the current Defence Investment Plan. To raise £3 billion, departmental capital budgets will be cut by 1% over the 2027-28 to 2029-30 period. An unallocated Treasury capital reserve will supply the remaining £1.7 billion. The government has not described this package as the funding route for the 3% target.
The government also announced an Innovative Defence Financing Taskforce and a separate financing commitment from the National Wealth Fund and British Business Bank. The two institutions are to commit as much as £5 billion over four years, combining investment and loans for defense, dual-use technology and sovereign capability. The Budget does not say how much of that financing, if any, will count toward the spending target.
Before the Budget, the Institute for Fiscal Studies (IFS) estimated that reaching 3% in fiscal 2030-31 would cost about £11 billion more that year than holding spending at 2.7% of GDP. The IFS warned that keeping total spending unchanged could leave other departments facing larger inflation-adjusted cuts. Conservative leader Kemi Badenoch called the Budget “a plan to have a plan.” ITV News separately reported that IFS Director Helen Miller questioned how much investment in defense companies would translate into military capability.
The spending review next year is the government’s stated opportunity to explain its route to the targets. The Budget did not give a date for the review.
