13th June 2026
As Britain faces growing international tensions and pressure to increase defence spending, politicians have increasingly framed the debate as a choice between funding the armed forces or maintaining the welfare system. It is a simple message, but is it an accurate one?
The Resolution Foundation has challenged this popular narrative, arguing that the comparison is both misleading and incomplete. Their analysis suggests that the question is not really "defence versus welfare" at all. Instead, it is about how Britain chooses to allocate limited public money across every major area of government spending.
For many years the UK benefited from what economists call the "peace dividend". Following the end of the Cold War, defence spending steadily declined as a proportion of the economy. Governments of all political colours were therefore able to redirect billions of pounds into other priorities without having to raise taxes by the same amount.
The common claim is that this money simply funded an ever-expanding welfare state. However, the Resolution Foundation argues that this interpretation is only partly true.
One reason is that many commentators use a narrow definition of welfare, concentrating on working-age benefits administered by the Department for Work and Pensions. This overlooks major changes in the way benefits have been administered, particularly the transfer of Tax Credit claimants from HM Revenue & Customs onto Universal Credit. Looking only at DWP spending creates the impression that welfare has suddenly increased when, in reality, much of the change reflects accounting and administrative reforms rather than a dramatic rise in benefit generosity.
The Foundation also points out that child-related benefits and pensioner benefits are often ignored when commentators compare defence spending with welfare expenditure. Once these are included, the picture changes considerably.
More importantly, the overall figures show that the largest beneficiary of the peace dividend was not working-age benefits at all.
Health spending has risen dramatically over the past four decades, increasing by around 4.5 per cent of GDP since 1980. Total welfare spending has also increased, but by considerably less. During the same period Britain also enjoyed a substantial fall in the cost of servicing its national debt as interest rates declined around the world.
In other words, the savings from lower defence spending did not simply finance welfare benefits. They helped fund the NHS, pensions, education, public services and lower debt interest costs. The peace dividend was spread across almost every area of government.
That brings us to today's dilemma.
The international environment has changed profoundly. Russia's invasion of Ukraine, growing tensions in the Middle East, increasing cyber threats and China's military expansion have persuaded governments across Europe that defence budgets must rise once again.
Unfortunately, the peace dividend has now largely disappeared.
At the same time, Britain faces an ageing population, rising healthcare costs, higher debt interest payments and relatively weak economic growth. Every major area of public spending is under pressure.
This is why presenting the issue as "defence versus welfare" risks misleading the public.
The reality is that governments are confronted with a far wider policy problem. If defence spending increases, where should the money come from?
Should taxes rise?
Should the Government borrow more?
Should the NHS receive smaller annual increases?
Should infrastructure projects be delayed?
Should pensions be reformed?
Should welfare benefits be reduced?
Should education or local government face further restraint?
Each option carries political and economic consequences. None is easy.
There is also an important distinction between current spending and long-term investment. Some defence expenditure supports highly skilled manufacturing jobs, research and technological innovation within the UK economy. Likewise, spending on healthcare can improve productivity by creating a healthier workforce, while investment in education strengthens future economic growth. Simply comparing one spending programme against another ignores these wider economic effects.
Equally, some welfare spending is itself an investment. Support that enables disabled people to work, childcare that helps parents enter employment, or housing assistance that prevents homelessness may reduce costs elsewhere in the public sector over time.
This demonstrates why simple spending comparisons rarely tell the whole story.
The Resolution Foundation therefore makes a valuable contribution by challenging an increasingly common political slogan. The debate should not be reduced to welfare versus defence because government finances do not work that way.
Britain now faces the difficult task of rebuilding its military capabilities after decades of lower defence spending while continuing to fund an ageing society and protecting essential public services. Those are genuine policy choices that deserve an honest national conversation.
Perhaps the most important question is not whether defence should be funded instead of welfare, but whether the country is prepared to pay for both. If voters want stronger armed forces, a world-class NHS, generous pensions, good schools and a comprehensive welfare system, then either taxes must eventually rise, the economy must grow much faster, or politicians will have to make difficult decisions about national priorities.
That is the real debate Britain now needs to have.
Further Thoughts
One thing that is notable over the last few years is that many public spending debates are presented as binary choices because they're easier to explain in a headline. In reality, government budgeting is much more interconnected.
In this case, the phrase "defence versus welfare" is politically powerful because it immediately suggests two competing priorities. But as the Resolution Foundation points out, it leaves out much of the story.
There are at least four reasons why the framing can be misleading:
"Welfare" means different things to different people.
Many people hear "welfare" and think of unemployment benefits or Universal Credit. In public finance, however, welfare also includes pensions, disability benefits, carers' support and child benefits. If someone argues for "cutting welfare", they rarely specify which parts they mean.
Government spending is one large budget.
If defence spending rises, the money doesn't have to come from welfare alone. It could come from:
higher taxes;
more borrowing;
slower increases for the NHS;
delaying transport or infrastructure projects;
reducing overseas aid;
public sector efficiency savings; or
a combination of all of these.
Historical comparisons can be selective.
As the Resolution Foundation showed, if you compare defence with only one part of welfare spending, you can tell one story. If you compare it with the whole welfare budget or with health spending, you tell a different story. The choice of comparison influences the conclusion.
Today's pressures are very different from those of the 1980s and 1990s.
Britain no longer enjoys the "peace dividend." Instead, it faces:
higher defence needs;
an ageing population;
greater demand on the NHS;
higher debt interest costs; and
slower economic growth.
That means there is less room to expand one area of spending without affecting another.
There is understandable concern
Many people receiving benefits, including pensioners, disabled people and low-income families, will understandably worry when they hear politicians discussing higher defence spending alongside welfare savings.
If the debate is presented as "more money for defence means less money for welfare", it is natural for people to fear that their income could be reduced.
But there is no evidence that all benefits are under threat
The welfare budget is made up of many different programmes, including:
the State Pension;
Universal Credit;
Personal Independence Payment (PIP);
Attendance Allowance;
Carer's Allowance;
Child Benefit;
Housing Benefit; and others.
These are not all treated the same politically or financially.
State pensions are particularly difficult to cut
The State Pension accounts for a very large share of welfare spending.
Successive governments have generally protected pensioners because:
older people are more likely to vote;
many pensioners rely heavily on the State Pension;
pensioner poverty was a major issue before pension spending increased over previous decades.
That doesn't mean pensions can never be reformed. Governments could change:
the State Pension age;
the Triple Lock;
eligibility rules;
or tax treatment.
But outright reductions would be politically very controversial.
Working-age benefits remain under scrutiny
Working-age benefits have been reformed repeatedly over the last fifteen years.
Governments of different political colours have argued that:
more people should move into work;
benefits should be better targeted;
the welfare bill should be affordable.
This means working-age benefits are often where governments first look for savings.
Disability benefits are becoming a major debate
One of the fastest-growing areas of spending is disability-related support.
The Government has argued that spending is rising rapidly and wants reforms.
Critics argue that the increase reflects:
an ageing population;
poorer health after the pandemic;
more mental health conditions;
and better recognition of disabilities.
This debate is likely to continue regardless of defence spending.
Defence is only one pressure on the public finances
It is important not to assume defence is the only reason governments may review benefits.
Public finances are also under pressure because of:
rising NHS costs;
social care;
debt interest payments;
slower economic growth;
demographic change.
Even without higher defence spending, governments would still face difficult choices.
The bigger question
Rather than asking whether defence spending will lead to benefit cuts, the better question is:
How can Britain pay for all the services and support that people expect?
There are only a limited number of options:
grow the economy faster;
increase taxes;
borrow more;
reduce spending elsewhere;
improve efficiency across government;
or pursue some combination of these
One sentence from the Resolution Foundation piece stood out to me:
"The peace dividend has funded more welfare – but it's the NHS, not benefits."
That is a useful corrective to the public debate. But I would go one step further.
The real policy challenge is not choosing between defence and welfare. It is deciding what size of state the country wants and how it is prepared to pay for it. Defence, the NHS, pensions, disability support, education and local government all compete for the same tax revenues. If voters want high-quality provision in all these areas, either the economy must grow significantly faster or taxes will eventually need to rise. Otherwise, governments will continue to face difficult choices about priorities.
Bill Fernie
BBC
https://www.bbc.co.uk/news/articles/c6244zqnk16o
Richard Murphy's Blog 12 June 2026
What is the real defence crisis the UK faces