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Defence Expenditure - NATO 2% Target

Published Wednesday, October 21, 2015

In 2006, NATO allies set a target to spend 2% of Gross Domestic Product (GDP) on defence. The UK continues to meet this target, but when reporting its defence expenditure to NATO, the UK now includes several items of expenditure which had not previously been included.

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In 2006, NATO allies set a target to spend 2% of Gross Domestic Product (GDP) on defence. The United States has repeatedly called on European allies to contribute more and in recent years NATO’s Secretary General described declining European defence budgets as “unsustainable” when compared with increased Russian spending on its military. The UK Government, one of the few NATO allies to meet the target, has consistently called on other European nations to spend more on defence. NATO imposes no sanctions or penalties on countries who do not meet the 2% target, and no country has it written into their domestic law that the target must be met, either in a given year or averaged over a number of years.

In the UK, annual defence expenditure has exceeded 2% of GDP ever since records began. However, defence expenditure as a percentage of GDP declined markedly following the end of the Cold War, from 3.7% in 1991 to 2.4% in 1998. Since then, defence expenditure has remained broadly static as a percentage of GDP, though it has declined slightly in recent years, from 2.4% in 2011 to 2.2% in 2014.

UK defence expenditure 1988 - 2014 (% of GDP)


The 2% target was debated at length prior to and after the general election in May 2015. The Conservative party initially resisted calls to explicitly commit to the 2% figure, with Ministers saying future spending commitments would be made in the autumn Comprehensive Spending Review. However the Chancellor pre-empted his own CSR when he announced, in the Summer Budget, that the Government is committed to meeting the NATO target of 2% on defence year for the remainder of this decade.

According to figures published by NATO on 22 June 2015, the UK is projected to spend 2.08% of its estimated GDP on defence during 2015/16. However, when reporting this figure to NATO, the UK included several items of expenditure which had not been included in previous years, including provisions for war pensions, assessed contributions to UN peacekeeping missions, pensions for retired civilian MoD personnel, and much of MoD’s £1.4bn income. NATO has accepted that the items conform with its definition of defence expenditure, but according to RUSI estimates, if the UK had not chosen to include these new items, its projected defence spending in 2015/16 would have been just 1.97% of estimated GDP, even before accounting for the £500m cut announced on 4 June.

RUSI projections indicate that if the UK is to continue meeting the 2% target for the rest of the decade, it will need to make further changes to its reporting conventions. If spending on the Secret Intelligence Agencies (SIAs) were included, as suggested in the 2015 Summer Budget, the UK would meet the 2% target each year up to and including 2018/19. From 2019/20, however, RUSI argues that the UK would be unlikely to meet the 2% target unless spending on the Joint Security Fund were also included.

Commons Briefing papers SN07134

Author: Rob Page

Topics: Armed forces, Defence equipment and procurement, Defence expenditure, Defence policy, NATO, Public expenditure

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