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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.

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)UK defence expenditure (% 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. 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.

The Bill would require the Government to spend 2% of Gross Domestic Product (GDP) on defence each year from 2016/17 onwards. If the UK failed to meet the target in any year, the Secretary of State would be required to lay before Parliament a statement explaining why this was the case, and explaining what steps he/she had taken to ensure that the target would be met the following year. The Bill would also require the Government to arrange for the UK’s definition of defence expenditure to be independently evaluated, to ensure that any spending counted as defence expenditure by the UK also complied with NATO’s definition of defence expenditure.

It is widely argued that continuing to meet the 2% target is an important determinant of the UK’s influence on the global stage. However endorsement of the target should not be taken to mean support for legislative action. The Government does not support the Bill, and has resisted calls to put the 2% target in legislation. Several Members have spoken out against enshrining the 2% commitment in law. Philip Davies and Sir Edward Leigh have argued that spending should not be hypothecated.

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