UK Defense spending to shrink in real terms due to high inflation
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The Telegraph, citing a leading UK think tank, says actual defense spending will shrink in the next years if inflation is factored in.
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A woman with an umbrella stands in front of the Bank of England, at the financial district in London, Thursday, Nov. 3, 2022 (AP Photo/Kin Cheung)
The cabinet of UK Prime Minister Rishi Sunak will not cut defense spending but will however slump in real terms as inflation bites, The Telegraph reported on Saturday.
It is expected that the UK Treasury will announce in the coming week that all departmental spending for the next two years will remain as agreed in the 2021 overview of spending, according to the newspaper, citing a leading UK think tank.
The UK Defence Ministry's budget will rise in monetary terms from 47.9 billion pounds ($56.7 billion) in 2022 to 48 billion pounds in 2023, growing further to 48.6 billion pounds in 2024. However, the current inflation, which stands at 10.1%, will erode those budgets, leaving much less in real terms.
Thus, actual defense spending will shrink in the next years if inflation is factored in, The Telegraph said citing the Royal United Services Institute think tank.
Read: Recession in UK to last 2 years, Bank of England hikes rates
Liz Truss, Sunak’s predecessor, pledged to ramp up defense spending to 3% of GDP by 2030. New Chancellor of the Exchequer Jeremy Hunt is expected to present his fiscal statement on November 17, which may feature tax hikes and cuts in government spending, including defense, to reduce the budget deficit.
On November 3, the Bank of England raised interest rates to 3%, increasing from 2.25% - the biggest increase since 1989, as it warned of a "very challenging" outlook for the economy. The central bank predicts that the UK entered a recession in the third quarter of 2022, and the recession will be ongoing until mid-2024.
In October, the annual inflation in the UK in September accelerated to 10.1% from 9.9% a month earlier, the UK Office for National Statistics said, which is the highest number in the country's history since February 1982. Inflation is projected to grow to 11% in the fourth quarter of 2022.
