David Gauke is a former Justice Secretary and was an independent candidate in South-West Hertfordshire at the 2019 general election.

Russia’s invasion of Ukraine – three years’ ago today – forced European countries to ask themselves some hard questions about their own defence capabilities.  The election victory of Donald Trump, and his comments since becoming US President, has made those questions both harder and more urgent.

The situation is undoubtedly grim.

In Russia, we have a power in Europe that has been willing to invade a peaceful neighbour for no other reason than to restore its former empire.  There is no reason to think that Russia would cease at the borders of Ukraine if they had the chance.

Appalling though its behaviour has been, the reality of a hostile and expansionary Russia is one that we experienced for most of the twentieth century.  But for most of that time, the western European nations were supported by a powerful and steadfast ally in the United States.

The same cannot be said today.

There are those who argue that we should not rush to judgment on Trump but at best Trump has turned the US into an unreliable ally to the European democracies.

This leaves us in a very difficult situation.  European leaders are trying to salvage the situation, in the hope that the transatlantic relationship can be partially saved.  They are right to try, but as well as hoping for the best they must prepare for the worst.  This means a world in which US may be more closely aligned to Russia than the European democracies.

The most obvious aspect of this is defence spending.  Trump is right to say that US defence spending has enabled European nations to spend less than they otherwise would, although he is profoundly wrong to believe that the US has not benefited from its approach.

That period of support has come to an end at a particularly dangerous time.  Russia is at its most hostile but, for the last three years, the courage of the Ukrainians has succeeded in depleting its neighbour’s capabilities.  The likes of JD Vance and Elon Musk are quick to claim that Ukraine cannot win its war, but it is not clear that Russia can win it either.  Its losses in term of men and materiel are immense and its economy is an unsustainable position with inflation and interest rates very high.  The longer the war lasts, the more the wider Russian threat is diminished.  Just look at the collapse of Bashar Al-Assad’s regime in Syria, where Moscow could no longer help him.

Ending the war now, accompanied by the lifting of sanctions, allows Russia to recover and regroup, while the European democracies – not to mention Ukraine – will have been humiliated and demoralised.  It is a scenario in which we will have to spend more on defence in the longer term than if the Ukrainians had been properly supported to continue to defend themselves.

The case for higher spending on defence, therefore, is irresistible.  This does not, however, make it easy.  Before the Prime Minister makes a commitment in terms of a percentage of GDP to be spent on defence, there are a few points that the Treasury will want to make.

The first is that there is no money left.  Increasing defence spending from 2.3 per cent of GDP to 2.5 per cent will cost in the region of £5-6bn, getting to 3 per cent would cost something like an additional £12-15bn a year.  Rachel Reeves currently looks set to break her already loose fiscal rules when the OBR reports next month.  The bond markets have already shown signs of nervousness, even though matters are much calmer than they were briefly in January.  Our debt interest payments already exceed £100bn a year, so sustained deficit financing for higher defence spending would be very risky.

At most, a short term increase in borrowing might be possible.

Defence spending could be prioritised, with other parts of Government spending being reduced but that is more easily said than done.  The history of Government spending for the last sixty years has been defence spending falling and health spending rising.  Reversing that higher health spending would be impossible.

Benefits are the other big item of expenditure.  Tightening up the rules for disability benefits is the obvious place to start, but we almost certainly need to do that just to make the existing numbers add up, let alone fund higher defence spending.  We could (and should) abandon the pensions triple lock but the benefits to the exchequer are uncertain over the short term.  It would nonetheless send a good signal to the markets as to the long-term sustainability of the public finances.

That leaves tax.  I would expect the Government to freeze income tax thresholds and allowances for another couple of years, but that was already necessary.  To raise serious sums of money, one must use the big taxes – income tax, national insurance contributions and VAT.  Labour ruled out using these taxes at the last election, even if it turned out that the guarantee did not extend to employers NICs.  It is unlikely that they will return to employers NICs, given the negative reaction from business.

On the principle that one should never waste a crisis, the Government may conclude that the only way it can fund defence is to raise taxes that it had previously ruled out.  It is not obvious that the public is ready for it, but there is little alternative if defence spending is to reach levels close to 3 per cent of GDP.  To get a sense of scale, RUSI estimated that income tax would have to be increased by 5 percentage points for the basic and higher rate or VAT increased to 25 per cent to raise the necessary sums.

The Treasury will be keen to spell out these fiscal realities.

The second set of points the Treasury will be keen to make will relate to how the money is spent.  As is often the case, the current debate is focused on inputs – what we put in – not outputs – what we get out of the spending.

Assuming that defence spending is increased, what capabilities will be improved?  Will these capabilities be properly focused on the threat of Russia, which should be the point, or elsewhere?  Are we focused sufficiently on new technology?  (It was not widely appreciated, for example, that drones were going to be much more important than tanks in the Ukrainian conflict.)

A sharp increase in expenditure is often accompanied by high levels of waste.  How do we avoid that?  Do we assume we can no longer trust the US as military allies?  How do we adjust to a world when we may not want to be so dependent on procurement from the US?  And can we get more out of our expenditure if we closely coordinate what we do with European allies, particularly the French, Germans and Poles?  To what extent does that require stronger political structures to make that work?  There may be some political sensitivities there.

This is not to argue that higher defence expenditure is not needed.  It is.  My own instinct is that money spent arming Ukraine today to enable them to continue to deplete Russia’s military capability should be the priority and could reduce the need for higher spending in the future, but higher defence spending still looks inevitable.

We should not fool ourselves, however, in believing that higher spending can be easily delivered, or that the additional resources will necessarily be well-spent.

The choices are stark.

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