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30 Oct 24. UK Budget: minimal increase leaves Defence wanting.
Still falling short of the 2.5% GDP spending target for Defence, the significance of the forthcoming Strategic Defence Review will be decisive.
UK Defence will continue to tread water following the Labour government’s first Budget which it unveiled to the public on 30 October 2024.
While the Treasury announced it has allocated £2.9bn of additional funding – growing the defence budget by 2.3% – the Ministry of Defence still falls short of spending 2.5% of the country’s GDP. This is an aspirational target the government has previously set without any discernable timeline.
It is worth noting that earlier in July, the Armed Forces Minister, Luke Pollard, suggested that the Chancellor would determine a roadmap to achieving this target in the autumn Budget.
“Safeguarding a nation is not an easy feat, nor is it an inexpensive one,” reflected Andriy Dovbenko, founder and principal, UK-Ukraine TechExchange. “It is the responsibility of the government to learn from events in Ukraine and take the initiative to ensure it is agile and adaptable enough to fortify itself against any future international or domestic threats.”
Laying out the details of a new can-do fiscal policy to the House of Commons centred on overcoming a debilitating ‘black hole’ in the public finances, the Chancellor, Rachel Reeves, suggested that defence spending still “comfortably exceeds our commitments,” such as Nato’s 2% GDP benchmark.
The government is eager to characterise its agenda as a People’s Budget and while they may be lauded for safeguarding the interests of working people, as they see it, defence is left to hang by a thread – but only for a little longer.
‘Business as usual’ until the SDR
It is a busy time for the Ministry of Defence as it undergoes a “root and branch” assessment of the the UK Armed Forces and its readiness in what is referred to as the Strategic Defence Review (SDR), due to be released before the end of the first half of 2025.
“I think the government is largely going to retain the ‘business as usual’ inheritance from the [previous] Conservative government for the time being when it comes to equipment, procurement, personnel, etc. until the SDR is concluded next year,” observed GlobalData Defence Analyst James Marques.
This involves providing just enough growth to the defence budget but not enough when we consider the volatile security environment the country will be forced to confront on the world stage. Some analysts even anticipate that the UK Armed Forces need to be ready to fight the Russians by 2028.
“In the current economic environment I’m not surprised that there’s no substantial increase,” Marques suggested. “But depending on the outcome of the Defence Review there may be a different direction in terms of how that money is spent. However, all this will be planned in the longer-term.”
Ukraine military assistance
Notably, the Chancellor did not provide any additional support for Ukraine in her speech to Parliament, though she did rightly note recent announcements of British support for Ukraine.
Just last week, Britain was the first Group of Seven nation to pledge £3bn in military assistance to the war-torn nation, though this comes in the form of a war loan to be paid for with the proceeds on frozen Russian assets in the West.
Prior to this, the UK government also committed to providing £3bn per year for as long as Ukraine needs the support.
Ukrainian forces use 155mm M777 howitzers, provided by Western partner states, in the course of hostilities, 23 November 2022. They are essential for the Ukrainian Armed Forces to successfully repel Russian attacks in the Donetsk region. Credit: Serhii Nuzhnenko (Radio Free Europe/Radio Liberty) / the Collection of war.ukraine.ua.
This financial backing is vital to the efforts of Ukraine’s Armed Forces as they struggle to repel marginal Russian gains in the Donbas. According to the Institute for the Study of War the Russians have made significant tactical gains in and near Selydove (southeast of Pokrovsk) over the course of the past week. Likewise, Ukraine’s forces are conceding several hundred square kilometres of Russian territory its forces gained during the Kursk incursion in August.
Dovbenko expressed his view to Army Technology that Reeves’ commitment of £3bn in aid to Ukraine every year until the war ends “signals a significant stride towards this goal and will be crucial for the coming months of the war effort.”
However, the UK needs to be more thoughtful, not wasteful: “How exactly this funding is applied in practice remains the deciding factor for its overall impact. Lack of clear communication and clarity regarding allocation has previously acted as a block to effective spending where it’s needed most.” (Source: army-technology.com)
30 Oct 24. EU Advised to Establish Spy Agency to Counter Growing Security Threats. The European Union was advised by former Finnish President Sauli Niinistö to establish its own intelligence agency to counter growing security risks. Commissioned by European Commission President Ursula von der Leyen to review the EU’s defense readiness, Niinistö presented his findings on Wednesday, emphasizing the need for a centralized intelligence service to improve counterespionage coordination and crisis response, particularly amid rising foreign threats to critical infrastructure.
Niinistö’s 165-page report also called for increased defense spending, recommending that the EU allocate up to 20% of its €1 trillion budget toward security and crisis readiness. Currently, national intelligence agencies handle most security threats independently, but Niinistö argued that a shared EU-level service could improve cooperation, manage cross-border threats, and protect strategic assets more effectively. He stated that stronger EU funding would also signal commitment to allies, including the U.S., especially as American foreign policy priorities may shift.
The report comes as Europe faces numerous challenges, including the war in Ukraine and a rise in cyber threats. EU intelligence agencies recently expelled several foreign diplomats accused of espionage, underscoring concerns about infiltration by hostile actors.
Niinistö also proposed an “EU Preparedness Law” to standardize defense measures across member states and address Europe’s shortage of cybersecurity experts, estimated at nearly one m. The recommendations aim to shape the EU’s defense agenda in the coming years, with von der Leyen’s anticipated second term set to include the appointment of the EU’s first-ever defense commissioner. (Source: https://www.sofx.com/)
30 Oct 24. Reeves announces £2.9bn boost for MOD, but no exemption from private school VAT.
The Ministry of Defence will receive a total increase of £2.9bn next year, Chancellor Rachel Reeves has announced.
As she delivered her first Budget she outlined her plans to ensure “the UK comfortably exceeds our Nato commitments”.
“We will set a path to spending 2.5% of GDP on defence at a future fiscal event,” she said.
The Chancellor also said the UK would provide “guaranteed military support to Ukraine of £3bn per year for as long as it takes”.
“Last week, alongside my right honourable friend the Defence Secretary [John Healey], I announced in addition to this, further support to Ukraine on top of our Nato commitment,” she said.
“Through our £2.26bn contribution to the G7’s extraordinary revenue acceleration agreement, repaid using profits from immobilised Russian sovereign assets.”
Ms Reeves also cemented into her Budget the policy to apply VAT to private school fees from January 2025.
“Ninety-four per cent of children in the UK attend state schools,” she said.
“To provide the highest quality of support and teaching that they deserve, we will introduce VAT on private school fees from January 2025 and we will shortly introduce legislation to remove their business rates relief from April 2025, too.
“We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5bn by the final year of the forecast.
“I can confirm today that they will, in fact, raise over £9bn to support our public services and restore our public finances.
“That is a promise made and a promise fulfilled.”
The move was controversial in military circles, with many asking for the Armed Forces to be exempt from the move.
The day before she delivered the Budget, the shadow defence secretary urged the Government to exempt military personnel from a hike to VAT on private school fees.
James Cartlidge, a former defence procurement minister in the previous Conservative government, said this could mean military families may be forced to choose between a career in the Armed Forces or their child’s education.
It had been previously reported that the Defence Secretary was taking a “hard look” at a possible exemption for military families.
There was, however, an increase to the Continuity of Education Allowance (CEA).
This is a payment that helps military families pay for their children’s education when they move frequently for service reasons.
The allowance is intended to help children receive a consistent education and develop relationships with their peers and teachers.
Remembrance was also included in the Budget announcement, with Ms Reeves saying in her speech to MPs that as Remembrance Sunday approaches “it is vital that we take time to remember those who have served our country so bravely”.
“I am today announcing funding to commemorate the 80th anniversary of VE and VJ Day next year to honour those who’ve served at home and abroad,” she said.
The Chancellor also announced plans to dedicate a further £2m to Holocaust education.
“We must also remember those who experienced the atrocities of the Nazi regime first-hand,” Ms Reeves said.
“I would like to pay tribute to Lily Ebert, the Holocaust survivor and educator who passed away aged 100 earlier this month.
“I am today committing a further £2m to Holocaust education next year so that charities like the Holocaust Education Trust can continue their work to ensure that these vital testimonies are not lost and are preserved for the future.” (Source: forces.net)
30 Oct 24. The EU should spend a fifth of its common budget on security and crisis preparedness as it enters a period of increased risk from geopolitical tensions and climate change, Finland’s former president warned in a landmark report on the bloc’s defence. Brussels had tasked Sauli Niinistö earlier this year with assessing the EU’s security needs following Russia’s war against Ukraine, Moscow’s hybrid threats and intensifying natural disasters. “The defining task today is to make sure that we are able to provide security to Europeans by being prepared for all risks, and that scale of risk is huge,” Niinistö said Wednesday when presenting the report which identified geopolitical tensions and climate change as the two biggest threats for the continent. In his report Niinistö recommends that “at least 20 per cent of the overall EU budget contributes to the EU’s security and crisis preparedness.” The current budget which runs until 2027 amounts to €1.2tn — roughly 1 per cent of the EU’s GDP. His findings came ahead of tense negotiations over the bloc’s next seven-year budget, with cash-strapped governments already reluctant about giving more money to Brussels. European Commission president Ursula von der Leyen, a former German defence minister, reiterated her call on EU governments to increase their preparedness in the face of Russian aggression. The prospect of Donald Trump’s return to the White House following next week’s US presidential election further increases pressure on European governments to raise their defence spending. Trump has threatened Nato allies to leave them at Russia’s mercy if they did not meet the alliance’s target of spending 2 per cent of GDP on defence. During Niinistö’s presidency, Finland abandoned its long-held policy of neutrality after Russia’s full-scale invasion of Ukraine and joined Nato. His second and last term in office ended in April. The EU needs to increase its joint defence spending, the former Finnish president said, noting that “the overall volume of EU funds compared to national budgets is insufficient to really impact the [defence] market”. Niinistö recommended that European citizens be prepared to stockpile goods that would last for at least 72 hours. He also advocated for private investment in the defence sector and changing the mandate of the European Investment Bank to allow it to invest in this area. EU funds intended for competitiveness could be allocated with security needs in mind, he said. But Niinistö stopped short of recommending fresh common EU debt for defence — something member states such as France have championed, but fiscally conservative countries like the Netherlands and Germany are wary of. Von der Leyen earlier this year proposed using EU cash to boost the European defence industry and jointly procure weapons, replicating the Covid-19 vaccine procurement programme, but member states such as Germany have been wary of backing this idea. On Wednesday, von der Leyen said additional funds for defence should come either from member state contributions or by creating new own revenue streams for the budget. “In one of these two elements, we have to decide how we move forward,” she said. (Source: FT.com)
30 Oct 24. France defense expenditure to reach $67.8bn in 2029, forecasts GlobalData. In July 2023, France outlined its defense spending plans for the next six years in the Military Planning Law (LPM) 2024-30, expanding the modernization initiatives kickstarted by LPM 2019-25 to reflect evolving geostrategic dynamics and better incorporate emerging technologies, including unmanned and space-based assets. Against this backdrop, France is forecast to increase its defense spending from $60.4 bn in 2024 to $67.8bn in 2029, according to GlobalData, a leading data and analytics company.
GlobalData’s latest report, “France Defense Market Size, Trends, Budget Allocation, Regulations, Acquisitions, Competitive Landscape and Forecast to 2029”, reveals that France’s defense spending is forecast to rise to $64bn in 2025.
Tristan Sauer, Senior Defense Analyst at GlobalData, comments: “The deterioration of European security following Russia’s invasion of Ukraine has highlighted the importance of France’s strategic reforms, providing the impetus for further and more diversified investment in defense and security capabilities. The most recent spending commitments will allow French defense expenditures to surpass 2% of GDP and finally attain the minimum threshold recommended for NATO members.”
France’s armed forces continue to pursue modernization across the different operational domains. The largest amount of spending is being directed to the fixed-wing aircraft, missiles and missile defense systems, naval vessels, submarines, and armored vehicles market segments over the next several years. Between 2024-2034, France’s largest investments are for the international FCAS New Generation Fighter program ($17.9bn), the SNLE 3G nuclear submarines ($17.3bn), and various upgrades to the Rafale fighter jet program ($12.9bn).
Sauer continues: “These investments are indicative of a renewed strategic focus on the commensurate rise of both great power competition and the risk of high intensity conflict. Procurement of conventional capabilities such as aircraft, naval assets, artillery, armored vehicles, and weapons systems is being supplemented with investment in cybersecurity as well as space systems to account for the increasingly diffuse and multi-domain nature of modern warfare.”
As with many western nations, France is facing recruitment issues leading to personnel shortages despite growing investment. GlobalData forecasts that France will spend $125.9 bn on military personnel between 2025-2029, though spending will only increase at a CAGR of 0.5%, which is far slower than the 1.26% CAGR achieved between 2020-2024.
Sauer concludes: “France’s continued investments in modernization and acquisition programs provide substance to the broader political refocus on strategic competition and its associated risks, with the nation’s growing defense industrial base providing growing opportunities for international engagement. However, much like with the US and other NATO allies, lackluster performance with regards to personnel recruitment and retention is indicative of a wider challenge, which current investments have thus far failed to overcome.”
30 Oct 24. Fire breaks out at BAE’s UK nuclear submarine yard, police say. A huge blaze has broken out at BAE Systems’ (BAES.L) shipyard that builds Britain’s nuclear submarines but there is no major risk from the incident, police said on Wednesday. Pictures online showed what looked like flames and black smoke emerging from the top of the vast Devonshire Dock Hall building that is visible from miles away. Covering around six acres, it is the second biggest shipbuilding complex of its kind in Europe, according to the company.(Source: Reuters)
25 Oct 24. The head of the UK’s armed forces will gain fresh powers as the government launches a new military strategy headquarters in the coming weeks to improve Britain’s readiness for war. Defence secretary John Healey is putting into motion the most radical structural shake-up of the Ministry of Defence in 50 years, as he warns of the growing threat of conflict. The reforms aim to streamline processes, cut waste and enable faster delivery within the department, as well as to ensure clearer accountability and boost the use of data and technological innovation. Healey will place the command of the army, navy, air force and strategic command under the chief of the defence staff, who is head of the UK armed forces, for the first time. Previously the four-star officers in charge of the individual forces reported directly to the defence secretary instead of the chief of the defence staff, a fellow four-star officer. The chief of the defence staff — currently Admiral Sir Tony Radakin — will become central to investment decisions including personnel, training and support alongside equipment together with the defence secretary and MoD permanent secretary. They will also set the overall direction of the UK’s armed forces, bolstering integration and breaking down silos, as well as reducing duplication The new military strategy HQ is likely to be set up within the MoD’s premises on Whitehall, known as mainbuilding, before the end of this year, in order to be ready to implement the outcome of the government’s strategic defence review that is set to report next spring. Healey is also launching the recruitment process for a new national armaments director to operate across the department, rather than just one branch, to overhaul procurement and cut waste, following criticism over many years about delays and overspending in MoD equipment programmes. However, the National Audit Office recently issued rare praise for the MoD over the fast-tracked procurement and distribution of kit to the frontline in Ukraine — successes the ministry hopes to capitalise on. The new national armaments director will be responsible for ensuring the armed forces are properly equipped to defend Britain. A person with strong links to the defence sector is sought for the role, as they will help shape and deliver a new defence industry strategy to be launched within weeks. They will also be expected to oversee the resilience of defence supply chains and the readiness of the national arsenal. Healey admitted this week that the British military had become “hollowed out”, which he told Politico was due to a lack of investment by the last Tory government. (Source: FT.com)
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