Ben Zaranko, Associate Director, Institute for Fiscal
Studies said:
"If the UK needs to spend more on defence on a structural and
permanent basis, that is not something that can be sustainably
borrowed for. The Prime Minister has recognised this, and has
signalled that higher defence spending will be offset, at least
in the short term, by lower spending on overseas aid. If defence
spending needs to go higher than 2.5% of GDP, cuts to aid won't
be enough. Getting towards 3% of GDP will eventually mean more
tough choices and sacrifices elsewhere - whether higher taxes, or
cuts to other bits of government. The world has changed, and one
question is whether the government's pre-existing promises on tax
and spend might need to change as well.
As a minor note to what is a major announcement, the Prime
Minister followed in the steps of the last government by
announcing a misleadingly large figure for the "extra" defence
spending this announcement entails. An extra 0.2% of GDP is
around £6 billion, and this is the size of the cut to the aid
budget. Yet he trumpeted a £13 billion increase in defence
spending. It's hard to be certain without more detail from the
Treasury, but this figure only seems to make sense if one thinks
the defence budget would otherwise have been frozen in cash
terms. This is of course dwarfed by the significance of today's
announcement but is frustrating none the less."
