Raise defence spending to 2.6 percent: note

Central fiscal result

+£8.0bn - Net fiscal impact in 2028-29

Low case: +£4.0bn. High case: +£13.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Models raise defence spending to 2.6 percent by 2028-29.
• Baseline is current policy or published departmental plans.
• Central case uses published party or official anchors where available.
• Wider manifesto interactions are excluded unless stated.

Affected population

• Affected units are people, firms, households or providers depending on policy.
• Direct exposure follows the manifesto or government target group.
• Indirect exposure includes suppliers, workers, consumers and taxpayers.
• Weakest counts are widened in the low and high cases.

Gross impact

• Published anchor or scenario central is +£8.0bn in 2028-29.
• Gross costs or receipts are adjusted for behaviour and delivery risk.
• Tax, benefit or procurement offsets are separated in the fiscal build-up.
• The range is deliberately wider where implementation detail is thin.

Fiscal build-up, central case

• Gross programme or delivery cost: +£9.2bn
• Tax and receipt offsets: -£0.6bn
• Administration and evaluation: +£0.1bn
• Behavioural and pass-through effects: -£0.7bn

Central net impact: +£8.0bn in 2028-29.

Behaviour and pass-through

• Low case assumes stronger delivery or receipts than central.
• Central case applies moderate behavioural leakage and pass-through.
• High case allows weaker delivery, larger take-up or higher costs.
• Output effects follow incidence, capacity and investment channels.
• Distributional gains do not automatically imply GDP gains.

Phasing

• 2026-27: +£0.8bn. Phased implementation and take-up.
• 2027-28: +£4.4bn. Phased implementation and take-up.
• 2028-29: +£8.0bn. Phased implementation and take-up.
• 2029-30: +£8.0bn. Phased implementation and take-up.

Main source groups

• HM Treasury, "Budget 2025" (2025): Budget 2025 sets out implemented welfare, energy, motoring and tax-threshold measures; used for current government delivery policies.
• House of Commons Library, "UK defence spending" (2025): The briefing records defence spending plans and the move toward higher GDP shares; used for defence-spending scale.
• Graham and Gibbons, "Quantifying Wider Economic Impacts of Agglomeration" (Journal of Transport Economics and Policy, 2019): Transport improvements can raise productivity through agglomeration, but benefits are location-specific; relevant to rail, bus and active-travel investment.
• Nordhaus, "Climate Change: The Ultimate Challenge for Economics" (American Economic Review, 2019): Climate change creates large external costs, but policy must balance abatement, innovation and costs; relevant to carbon and green-investment policy.
• HM Treasury, "Spending Review 2025" (2025): The review sets departmental spending plans across health, defence, housing, schools and transport; provides implementation and budget context.
• Labour Party, "Change: Labour Party Manifesto 2024" (2024): Used to define the pledge wording, policy scope and implementation scenario being modelled.