UK Defence Spending Increasing partly by by reducing the Overseas Development Assistance

29th September 2025

According to analysis published by the Institute for Fiscal Studies (IFS) in September 2025, the UK spent £66 billion on defence in 2024-25, which amounted to 2.3% of its national income. This spending level comfortably exceeds the 2% of GDP target for NATO countries.

UK's defence spending commitments
The current Labour government has announced a multi-stage plan to increase defence spending over the next decade.

Target of 2.5% by 2027: Prime Minister Sir Keir Starmer announced in February 2025 that the UK will reach a defence spending level of 2.5% of GDP by April 2027.

Path to 3% in the next Parliament: The government has also stated its ambition to further increase defence spending to 3% of GDP during the next parliamentary term, dependent on fiscal conditions.
Ultimate goal of 3.5% by 2035: As part of a NATO agreement, the government has committed to increasing defence spending to 3.5% of GDP by 2035.

Funding the increase
The government intends to fund the initial increase to 2.5% of GDP by 2027 by reducing the Overseas Development Assistance (ODA) budget from 0.5% to 0.3% of Gross National Income (GNI). The Institute for Fiscal Studies and others have noted that funding later increases to 3% and 3.5% will require more significant tax increases or spending cuts.

Changes in how defence spending is calculated
In February 2025, the UK government also decided to change its definition of defence spending to include the budget for its security and intelligence agencies—MI5, MI6, and GCHQ.

The government stated that by incorporating these agencies, the spending would rise to 2.6% of GDP in 2027.

This reclassification allows the UK to count a broader range of national security expenditures toward its defence spending targets.

How UK defence spending compares
While the UK has traditionally maintained the second-largest defence budget in NATO, it was overtaken by Germany in 2024. However, the UK's 2.3% of GDP spending for 2024 is still a larger proportion than that of France (2.0%) and Germany (2.0%).