27th September 2026
Britain has made a major choice. Defence spending is going up, and the Government has made clear that it intends to make national security one of the highest priorities for public spending.
The immediate increase is substantial. The Government has committed an additional £15 billion to its Defence Investment Plan between 2026-27 and 2029-30, taking total investment covered by the plan to almost £300 billion over four years. Defence spending is due to reach 2.7% of GDP from 2027-28, with a commitment to move towards 3% in the next Parliament and ultimately 3.5% by 2035.
But there is a question which is less often asked in the defence debate.
If more money goes into defence, where does the money come from?
The Government has already begun answering that question. The £15 billion increase is not simply being added to government spending without any offsetting measures. The Defence Investment Plan includes savings and reallocations from other areas of government, including reductions in departmental capital budgets and further savings involving transport and energy-related spending.
That brings Scotland into the picture.
Defence is a reserved responsibility. The Scottish Government does not decide how much Britain spends on the armed forces. But the Scottish Government is heavily dependent on funding from Westminster, and the way that funding is calculated means that decisions taken in Whitehall can have consequences in Holyrood.
This is where the Barnett formula becomes important.
If Westminster increases spending on a reserved service such as defence, Scotland does not simply receive an equivalent increase in its block grant. But if Westminster reduces spending on departments whose responsibilities are devolved, the consequential funding available to Scotland can also be affected.
In other words, a decision made in London to protect defence spending by reducing spending elsewhere can eventually become a financial problem for the Scottish Government.
That matters because the Scottish budget is already a very large balancing exercise.
The 2026-27 Scottish Budget provides almost £22.5 billion for health and social care, including more than £17.6 billion for NHS boards. Local government receives a settlement of almost £15.7 billion. These are enormous sums, but they also illustrate how little of the Scottish budget is actually discretionary once the major commitments have been taken into account.
And councils are particularly important because they sit at the end of a chain which can run from Westminster through Holyrood and eventually into local services.
Scottish councils spent about £27 billion in 2024-25, covering services ranging from schools and social work to housing, roads, refuse collection and planning. Much of that money comes through a mixture of Scottish Government funding, council tax, non-domestic rates and income from services.
So if the Scottish Government finds itself with less money available, the pressure does not necessarily stop at Holyrood.
It can move downwards.
A reduction in the Scottish Government's room for manoeuvre could mean tougher decisions over the amount available to councils. Councils would then face their own choices over services, staffing, capital investment, charges and council tax.
The same applies to NHS Scotland.
Health is already the biggest part of the Scottish Government's budget. The current Scottish Budget describes almost £22.5 billion for health and social care as a record amount and provides more than £17.6 billion for NHS boards.
It would therefore be misleading to suggest that defence spending automatically means cuts to the NHS. Governments have many ways of adjusting budgets, including taxation, borrowing within the applicable rules, efficiency savings and changing the timing of capital projects.
But it is equally difficult to argue that additional defence spending has no opportunity cost.
Every pound committed to one priority is a pound which cannot simultaneously be spent somewhere else.
That is where the argument becomes much bigger than defence.
The pressure could eventually reach almost every part of government spending. Transport projects can be delayed. Capital programmes can be reduced. Environmental schemes can be reconsidered. Economic development programmes can be changed. Housing investment can be postponed. Education budgets can come under pressure. Justice and policing have their own competing demands.
Then there is welfare.
This is particularly complicated in Scotland because some social security benefits are now devolved. The Scottish Government has introduced or expanded benefits which do not simply mirror the UK system. Those commitments therefore become another part of the Scottish Government's financial equation.
The result is a series of interconnected budgets rather than two separate ones.
Westminster makes a decision about defence.
Westminster then has to find savings, raise taxes or borrow more.
Those decisions affect the resources available to devolved government.
Holyrood then has to decide which Scottish priorities to protect.
The consequences can eventually reach councils, NHS boards and other public bodies.
For someone living in Caithness, the final effect could therefore be a long way removed from the original decision to spend more on defence.
It might appear as a council struggling to maintain roads, a capital project being postponed, pressure on NHS services, changes to social care provision or a decision to increase charges for particular services.
None of those outcomes is inevitable. But the financial chain connecting them is real.
There is another reason this deserves attention before the Chancellor's Budget on 28 October.
The £15 billion already announced is not the end of the story.
The Government has committed to moving towards 3% of GDP on defence in the next Parliament and 3.5% by 2035.
If that happens, the question of how Britain pays for defence becomes much larger.
It may eventually require a combination of higher taxation, economic growth, borrowing restraint and reductions or slower growth in other areas of public spending.
Scotland cannot stand outside that process.
The Scottish Government has its own priorities and its own tax powers, but it does not control the size of the UK-wide tax base or the overall spending decisions made by Westminster.
That creates an unusual situation.
Scotland can make different political choices about how it spends the money available to it, but the amount of money available is influenced heavily by decisions made elsewhere.
And this is perhaps the question that deserves more attention as Britain increases defence spending.
Not whether Britain should spend more on defence. That is a decision for the UK Government and Parliament.
The more practical question is: what happens to everything else when defence becomes a much bigger priority?
For Scotland, the answer may eventually be found not in one dramatic cut, but in dozens of smaller decisions spread across government.
A road scheme that takes longer to complete.
A capital project that is postponed.
A council settlement that grows more slowly than inflation.
An NHS investment that is delayed.
A benefit commitment that has to be reconsidered.
A service that moves from being free to requiring a charge.
Individually, each decision might appear relatively small.
Taken together, they could represent a significant change in the way public money is allocated across Scotland.
And for councils and NHS boards already facing their own financial pressures, the important question may be not simply how much money Scotland receives from Westminster, but how much of that money remains available after Britain's new defence priorities have been paid for.