Would increasing defence spending result in ‘cuts to schools and hospitals’?
The Big Ask | No.22.2026
After his resignation as Parliamentary Under-Secretary of State for the Armed Forces last week, Al Carns said in an interview with BBC News that the inadequate increase in defence spending proposed in the upcoming Defence Investment Plan (DIP) could be bolstered by reforming welfare spending – clarifying that he supports a ‘hand up, not a hand out’ approach.
An unnamed His Majesty’s (HM) Treasury official reacted to Carns’ thoughts on the DIP – as well as those that caused John Healey, former Secretary of State for Defence, to resign – by stating: ‘let’s be clear what John is asking for: cuts to schools and hospitals’. Such an attitude is not unique among HM Government, nor the British public at large. This debate over funding provides the basis for this week’s Big Ask, in which we asked six experts – as well as Gemini, Google’s Large Language Model (LLM): Would increasing defence spending result in ‘cuts to schools and hospitals’?
Adjunct Fellow, Council on Geostrategy, and Senior Policy and Communications Manager, Make UK Defence
Ultimately, the British population will not be sending its children to school if deterrence fails and Russia invades a North Atlantic Treaty Organisation (NATO) country by 2030, which is what the military and intelligence community are clearly warning is a real possibility. However, this is not the first lever to pull, and there are creative ways to boost defence spending without taking an axe to the budgets for the National Health Service (NHS) and schools.
The United Kingdom (UK) can finally join Canada and lead global efforts to kickstart a new multinational defence bank with the Defence, Security, and Resilience Bank (DSRB) to boost global defence spending with allies. Backed by major banks such as JP Morgan and Deutsche Bank, the DSRB will unlock significant multinational finance for defence with a AAA credit rating, and provide a credit loan guarantee to Small and Medium-sized Enterprises (SMEs) to help them scale up.
Britain can also take inspiration from its history and sell defence bonds, which allowed the UK to raise over £200 billion in today’s money during the Second World War. Ringfenced for high-growth activities in defence such as research and development, innovation, and procuring high-export potential capabilities, it can drive economic growth, generate significant spillovers for the economy, and strengthen collective deterrence.
Ministers can also avoid damaging ‘salami slicing’ of capital budgets by reallocating wasteful government spending – such as the £1.88 billion spent each year from the Patent Box tax relief scheme by making the scheme available to SMEs only.
HM Government knows there are other choices out there. Taking them, however, requires political leaders to remove themselves from complacent Treasury thinking which has only delivered economic stagnation since 2008, and instead deliver new ideas to boost defence.
Senior Lecturer in Economic Warfare Education, King’s College London
Facing a fiscal gap of £28 billion on top of its huge structural budget deficit, there is little doubt that HM Government’s ambitious defence spending plans will put substantial pressure on other budgets, including education and healthcare. Instead of taking meaningful measures to resolve its fiscal problems, however, it is trying to financialise its way out.
The discussions around the issue of ‘war bonds’ and the increasing reliance on venture capital signal a deeper shift: defence is no longer seen as a public good and a core state responsibility, but as something to be engineered through markets. Unlike traditional economic logic, when supply responds to organic demand, war bonds are created first and then demand is engineered through policy and institutional pressures to ensure they are absorbed by investors.
Proponents’ assurances that this spending will not come at public expense will quickly collapse once risks become evident. Capital markets do not think strategically; they follow incentives. While this may unlock some funding at speed, it conceals a series of grave risks that HM Government will be unwilling to acknowledge. As the structure of financing shapes production outcomes, the resulting defence posture is likely to reflect business logic rather than military necessity.
Strategic priorities may become distorted as investment flows favour scalable, high‑return technologies rather than the most appropriate defence capabilities. This is particularly evident in venture capital, where short investment horizons and high return expectations encourage rapid scaling and speculation, increasing the risk of failure rather than supporting stable defence capacity.
Threat narratives may become institutionalised, as sustained capital inflows depend on expectations of continued insecurity, creating incentives to maintain or amplify perceptions of risk.
The deeper integration of financial actors into defence decision‑making risks weakening democratic accountability, as priorities are shaped through opaque interactions between governments, investors, and large contractors rather than open political debate.
Finally, risk‑averse financial institutions willing to fund defence become constrained by expanding compliance regimes. Sanctions turn into a source of systemic uncertainty, deterring investment through higher costs and unpredictable enforcement. Legal concerns about this are often marginalised as they challenge dominant war‑making narratives.
So, while increasing defence spending and rebuilding infrastructure are necessary, the key risk is not overspending, but the subordination of security policy to financial imperatives, embedding escalation pressures, and structural biases into the system itself.
Adjunct Fellow, Council on Geostrategy
Increased defence spending does not have to lead to welfare cuts. Labour plunged itself into a defence spending crisis by trying to meet its 3% of Gross Domestic Product (GDP) by 2030 pledge purely through departmental reallocation. Yet, no state in history has rearmed in this way.
The most viable route is hypothecated borrowing, as in the 1930s, allowing defence borrowing to be temporarily exempt from the fiscal rules while keeping a tight lid on everything else. HM Government should borrow to invest only in the capital expenditure and research and development aspects of the defence budget, and back that by repurposing the National Wealth Fund, with £28 billion allocated, as a Defence and Resilience Fund.
Once the defence boom is under way – with trillions set to be spent globally – the defence sector may be windfall taxed. Finally, the 1.5% of GDP by 2030 NATO resilience spending pledge could fund both schools and hospitals, giving them deep basements and secure energy backups to harden them against contingencies.
Rob Murray
Honorary Fellow, Council on Geostrategy
Would higher defence spending mean cuts to schools and hospitals? Only if the UK insists on solving a 21st century problem with a 20th century playbook.
The debate in Westminster usually begins and ends with four options: raise taxes, cut spending elsewhere, borrow more, or grow the economy. All are valid. None are sufficient.
The uncomfortable truth is that Britain is trying to rearm using a budgeting model designed for peacetime. That worked when defence was a predictable line item in a government spreadsheet. It does not work when the challenge is rebuilding industrial capacity, scaling production, and keeping pace with rapidly evolving technology.
There is a fifth option: change the system.
This means creating larger allied defence markets, mobilising private capital alongside public money, and using institutions such as the DSRB to unlock investment at scale. The goal is not simply to spend more. It is to get more security for every pound spent.
Just as importantly, the UK needs to change how defence buys capability. More money poured into slow procurement systems will not produce better outcomes.
Here is the key point: the next war will not be won by the country with the best technology. It will be won by the country with the most agile bureaucracy. The victor will be the nation that can identify, test, procure, field, and scale new capabilities faster than its competitors.
For too long, Britain has treated defence as a budgeting problem. It is actually a productivity problem. The countries that figure this out will not only be safer – they will be richer too.
Head, Humanities and Social Sciences, and Associate Professor, Political Economy and the Future of Work, University of Exeter
Sir Keir Starmer, Prime Minister, came into power posing security as the ‘first duty’ of government; Rachel Reeves, Chancellor of the Exchequer, even cited Bernard Williams in suggesting that how a government secures the country is the ‘first political question’.
Something called ‘securonomics’ was the answer to this question, capturing how security and resilience spans multiple areas of social and industrial policy in an age of ‘hybrid’ threats. However, by skirting around the centrality of defence itself as the strongest guarantee of security, the past week has highlighted how securonomics may have acted as something of a sleight of hand.
This agenda enabled a party constitutionally incapable of establishing a clear order of priorities to have its cake and eat it, presenting what social democrats are comfortable spending money on – welfare, Net Zero, infrastructure – not as complements to defence, but as substitutes for what keeps the UK militarily safe in the last instance. This displacement activity defies the reality of physical geography, with the British Isles vulnerable to the actions of an aggressive adversary located close by.
The contradictions of securonomics exposed, there have been two responses from those keen to resist the implications of the security situation by arguing for limiting defence spending. The first approach has been to set up a false choice; Treasury sources briefing newspapers that the DIP would necessitate reduced investment in schools, hospitals, and the vague category of ‘growth’. Setting aside that the UK would not have any of these without its safety and integrity intact, this steers clear of where HM Government could restrain spending were its authority with backbenchers sufficient to do so – such as in welfare reform.
The second approach has been to problematise defence spending altogether. It is painfully true that procurement requires improvement to keep pace with innovation, but the familiar refrains about waste and excess are too often a convenient alibi for those who would rather not spend more on defence at all. The key question now is whether a new Labour leadership is capable of staging a conversation with the party that, clear-sighted about what is at stake, can provide a stronger and better answer to the first political question of security.
Co-President (Research), Council on Geostrategy
From 2010 to 2025, Britain spent just under £200 billion on Official Development Assistance (ODA) – otherwise known as foreign aid. £200 billion is comparable to about 15 extra large regional hospitals, 800 new high schools, 200 miles of additional high-speed railway line, or 2,500 miles of new motorway. All of these figures include whole-life costs, i.e., both the initial capital investment and the subsequent costs for upkeep and maintenance.
In terms of combat power, £200 billion would buy around 30 extra Astute class submarines or 70 new Type 26 class frigates for the Royal Navy, or well over 350 additional F-35B Lightning II Joint Combat Aircraft for the Royal Air Force (RAF). It would allow the British Army to invest in several new armoured brigades.
To put this into perspective, the UK currently has six frigates, five Astute class submarines, about 45 F-35B Lightning II aircraft, and two armoured brigades – all of which suffer from varying states of readiness.
True, foreign aid spending has been cut by successive governments in recent years, most recently by Sir Keir, to help fund defence. But even with the reductions, Britain plans to spend over £25 billion on ODA over the next three years – although some of that will be spent within the UK to look after refugees.
Equally, some aid spending may well enhance national security, although altruistic intent remains its primary objective. For example, between 2010 and 2021, the UK spent less than 0.2% of its ODA budget in Ukraine, despite the country’s growing geostrategic significance to British interests.
So, Treasury officials should not pit defence against schools and hospitals. Rather, they should ask prying questions as to whether the UK needs to spend so much on ODA when there are other pressing priorities, and when the nation’s adversaries are growing in strength.
Gemini
Council on Geostrategy staff have prompted Gemini, Google’s LLM, to reflect on this week’s Big Ask.
The assertion that funding the British Armed Forces adequately necessitates cuts to schools and hospitals is a false dichotomy, long favoured by a Treasury that treats national security as a discretionary cost rather than the paramount duty of the state.
As Carns underscored following his resignation, the machinery of government is failing to adapt to a fundamentally altered geopolitical landscape. When HM Treasury claims that increasing the defence budget threatens health and education, it deliberately ignores other vast areas of state expenditure. Carns rightly pointed out that choices exist beyond this narrow framing, explicitly questioning the size of the welfare budget and advocating for a ‘hand up, not a hand out’ approach to free up necessary capital for defence.
To pit the NHS against national security is a political choice, not an ironclad fiscal law. Fundamentally, without security, all other public goods are rendered highly vulnerable. Schools, hospitals, and economic growth require a safe, sovereign nation in which to operate.
If the UK is to meet the severe, compounding threats of the coming decade, HM Government should abandon bureaucratic zero-sum excuses. It should fund the military that the threat environment dictates, rather than the one that HM Treasury feels comfortable containing.
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What do you think about the perspectives put forward in this Big Ask? Why not leave a comment below?
Both John Healey and the Chief of the Defence Staff have suggested that that there are other ways of funding defence. The DSRB is one, the Multilateral Defence Mechanism is another and of course there are additional options such as finally implementing the Government's committment to use the £24BN of Russian State assets currently frozen in UK banks to support Ukraine. The legal risks of repurposing those assets (i.e. returning them to Russia once reparations have been paid to Ukraine for the illegal attacks) are arguably minimal. There's a more detailed discussion here https://researchbriefings.files.parliament.uk/documents/CBP-10034/CBP-10034.pdf
Adopting an effective Buy British policy for defence procurement that includes reasonable and appropriate changes to how social value criteria are used to assess security of supply would have a positive impact (perhaps a substantial impact?) on UK economic growth. What is quite depressing is that even with the recent significant amendments to Treasury guidance some officials and Ministers refuse to use them to change priorities. Perhaps they should pay more attention to the remarks of the new MP for Makerfield in which he pointed out that an ambitious DIP could be justified by applying "very strong social value weighting"?