Hey Big Spender! Is the UK really spending less than Germany on Defence?

According to the Sun, in an article so exclusive it had already been written about by multiple different organisations already and put out in a press release for the whole world to read, UK defence spending has declined to 8^th in the world. This is apparently a bad thing as our spending is now lower than France or Germanys. Cue moaning, ranting and harrumphing about how this isn’t good enough.

The problem is that the article isn’t actually true.

Image by Ministry of Defence; © Crown copyright

What has actually happened is that a well known think tank called ‘SIPRI’ (Stockholm International Peace Research Institute) has published its annual estimate of global military expenditure. This is an attempt to state how much money each country in the world is spending on defence and rank accordingly.

The challenge is that the Institute can be rather fickle in its assessment of what constitutes defence spending, with a lengthy list of criteria about what they include or exclude. In the case of the UK they have noted that they judge actual UK defence expenditure to be $11.2 billion less than the UK has declared to NATO.  In other words, they have arbitrarily imposed a criteria on what they do, and do not consider expenditure and then rank countries accordingly.

The problem first off is that there is no consistency in how this is applied. For example the report notes that it includes pensions expenditure, yet also notes that it has chosen to exclude pensions expenditure for the UK (potentially in their estimate some $3-4bn) due to lack of reliable data sets. So, in other words, they have arbitrarily written off a chunk of spending that they have factored in for other nations.

The second question is that because they cannot determine to their own satisfaction the entirety of the UK declaration to NATO on how the defence budget is spent, this means that it does not count as defence expenditure. In other words they are refusing to accept that some $7bn worth of British taxpayers money spent on the Defence budget each year is not defence spending in their eyes. This seems rather arrogant.

The result is a misleading table that incorrectly suggests that the UK spends less than France or Germany on Defence (with spending at $48.7, 49.3 and 50.1bn respectively). Yet if you were to look at the International Institute of Strategic Studies, in February they estimated that defence spending in all three countries is UK spending $54.8bn, France $52.3 and Germany $48.5bn on Defence. In other words a complete reversal compared to the SIPRI findings.

For context, the UK has declared to NATO that it spends approximately £46bn a year on Defence (which at the time of publication was estimated at being some $60bn).

Its important to remember that exchange rates can artificially enhance or detract from the perception of how much a country is spending on defence. There will always be some variation on the actual defence figure when using exchange rates – for example the change in pound – dollar exchange rate can account for some change – when the pound is at $1.30 then UK spending is almost $60bn, when its at $1.20 then the figure is closer to $55bn.

It is also important to remember that there is very little point in doing a like for like comparison on defence spending without considering how the money is broken down and spent each year, or considering how each nation chooses to fund its defence and national security priorities.

Each nation has a different set of issues, challenges and spending problems. For example, the UK not only funds defence and national security from the MOD budget, but also work from the Intelligence community, FCO budget and DfID as well, in addition to other contributions by different departments on a small scale.

This may not be spending on ‘bombs and guns’ but if a departmental budget used to fund conflict prevention and stability helps improve and deliver national security goals, then surely that is equally of importance as how much is spent on military pensions?

When considering the relative size of budgets look too at where nations fund through Defence what may more normally be funded in the UK by the Home Office. For example, do countries use defence budgets to pay for things like counter terrorism or riot police, or coastguard capabilities?

Also, it is worth asking what spending priorities are internally to understand differing levels of prioritisation. France for example spends a similar amount to the UK overall, but has to fund a significant nuclear burden on their own, while the UK benefits from costs being shared in part with the US on things like Trident or construction of the next generation of Common Missile Compartment.

A wider helpful contrast is to look at the NATO spending charts to work out in large handfuls how each nation chooses to prioritise its spending on Defence. According to NATO, in the table below shows the total percentage of budget assigned to the following areas in 2018:

	Equipment	Personnel	Infrastructure	Other
France	23.66	46.9	3.51	25.92
Germany	14.33	46.97	3.94	34.96
UK	24.23	33.79	2.98	38.99

What this chart helpfully shows is that spending priorities can vary quite significantly between nations, and can also vary from year to year. For example in 2019 Germany made a significant uplift to its procurement budget, as part of overall budgetary plans.

Spending money on defence does not magically mean you are the most powerful nation, and that spending as the third largest country means you magically can beat anyone below that on the line. Huge attention is paid for example to the Saudi figures on spending, yet the likelihood is that much of this is either vague theoretical figures that do not relate to actual awarded and funded contracts, rather announcements of planned spending that may or may not actually happen.

There is also a wider strategic picture to consider here – this information represents a snapshot in time and may, or may not, reflect capabilities and trends. The UK for instance spends a considerable amount on Defence but has a huge and unfunded ‘black hole’ totalling potentially up to £14bn at the heart of the Defence programme that requires deep defence cuts to resolve.

Germany too may have stepped up defence spending this year, but in real terms German defence spending is likely to decline year on year down to just 1.25% of GDP with German spending plans facing the need to make cuts. When added to the very serious readiness concerns about the current state of the German armed forces, with readiness levels and equipment availability being poor, even for newly delivered units, then questions must be asked about overall capability.

Capability is also a key question to consider – spending money does not make you a military power. It is the ability to recruit, train, deploy and recover your armed forces in line with defence policy, and help use them to meet your national security policy that matters. Suggesting that because a theoretical level of spending is less than another country on a deeply flawed ranking chart puts the UK at risk is perhaps a bit odd.

Finally we need to take a long term strategic view on defence spending – as noted, these ranking tables are a snapshot in time. Things can change very quickly and COVID-19 and ensuing global economic collapse is likely to disrupt these tables for years to come.

When you look at oil producing nations in the Middle East who have done budget predictions based on oil being above $70 a barrel, only to find it is now a fraction of that price, or Russia who is finding their economic situation may now be precipitous, you realise that there is no certainty in a chart.

Looking ahead we are likely to see real changes to how defence spending occurs over the next few years and it will be fascinating to see which nations rise and fall, and how this crisis impacts their willingness or ability to spend money as required.

It is easy to look at a table and decide we are doomed based on a made up set of numbers. It is much harder to pause and reflect on what level of capability we actually have. For the UK we need to remind ourselves that we have one of only three truly global armed forces, able to operate and deploy to any continent on the planet at a time and place of our choosing.

We enjoy the benefits of capable and well equipped armed forces, able to meet the tasks placed on them be it humanitarian aid, COVID-19 duties or fighting a war. We are able to do this in part with our allies (and gain enormous benefit from our membership of NATO) and we do so with a truly integrated national security structure that brings departments together as one, not as isolated individuals to meet a common national security goal.

Lets focus on the actual reality of our situation and how well placed we are, and not a made up number designed to get press coverage.