As The Guardian notes this morning:
The core of the story is that today's Defence Review will unveil a plan for increased defence spending by the UK, one of the goals of which will, apparently, be to create growth in the UK as a result of increased government spending.
There are three problems with this.
First, defence spending is not likely to be wildly popular when so many other government services are failing. The government will have to make a compelling case that it has got the focus of its spending right. I am a long way from convinced that twelve new submarines are what we need right now.
Second, their reference to Keynesianism is an oblique hint at multiplier effects. As I explained last week:
A multiplier effect records the amount by which the gross domestic product, the national income of a country, increases based upon an increase in government spending.
So, if you increase government spending by 1% and you increase gross domestic product by 1% as a result, you basically have a fiscal multiplier of one. 1% increase for 1% increase.
If you have a 1% increase in government spending, but you only get a 0.8% increase in GDP as a consequence, the fiscal multiplier is less than one. It's actually 0.8.
And if you spend 1% extra and you get a 2% increase in GDP, you've got a net positive effect of that spend and a multiplier of two.
It's welcome that the government has finally recognised this. The only problem is that defence spending has terrible multipliers: they are often less than one. This, then, is not the basis for an economic policy.
Third, admitting awareness of multiplier effects then leaves the government very exposed. The NHS has the best multiplier effects. Education is good. So are benefit payments. But the government is choosing not to support them. In other words, the politics of this announcement are dire for Labour.
It would appear that Labour are incapable of getting almost anything right. Getting an announcement on defence spending right should be added to the list of things they are incapable of doing without shooting themselves in the foot (metaphorically, of course; they would miss if they tried to do it in practice).
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“The only problem is that defence spending has terrible multipliers”
I wonder what the multiplier is: containers+garden shed+drones vs Nuclear bombers + subs. Which in turn begs the question: will the defense review consider garden sheds+drones as a new attack vector. I think we should be told.
(for those in need of more light entertainment: the Ukrainian office in Ruzzia coordinating the attack was located next to some regional FSB offices. Good to see the shade of Louis Furnes is alive & well).
It is thought to be well under 1
There was a report on multipliers – health had something in the range +2.5 to +4, I think defense was -9 or thereabouts.
One thing for sure; generals always fight the last war – thus one wonders what the defense review will consider – past warfare or future warfare (with or without garden sheds)?
@Mike Parr: Do you mean ‘Louis de Funès’?
Why not consider garden sheds + drones as a new vector for attacking the UK? Food for thought: ‘[The Ukranian attack] should also lead to intense security reviews at all NATO bases right now—we have been far too lax in allowing drone overflights of our facilities—and for allowing unfettered traffic alone and foreign nationals to buy land next to the most sensitive military facilities. The Ukrainians have just shown what enormous damage can be done by a (relatively cheap) drone swarm released close to a base. That has to be terribly worrying to every country in Europe and North America’: Phillips O’Brien, Professor of Strategic Studies, University of St Andrews, Substack post, 1 June.
Now that Der Sturmer and Rachel from Accounts have learnt a little about multipliers, do you think we should tell them about opportunity costs?
Hmmm. It might undermine their silly war-games though…
Money spent on the military also ensures that it is directed towards the already rich, unlike for the government department not dedicated to violence, which makes it popular with the corporate sponsors of our current Cabinet.
Thank you and well said, Matthew.
It won’t surprise you that BlackRock, the government’s “preferred investment partner, according to Whitehall chatter, is heavily invested in the war machine.
Have you noticed how often the likes of retired US officers like Petraeus, Hodges and Stavridis on British airwaves, but not British peers who are often more measured. The trio work on Wall Street for the war machine and are incentivised to promote war.
One should read coverage of the defence review with this: https://www.independent.co.uk/news/uk/home-news/child-poverty-baby-banks-labour-government-b2760799.html.
Richard and readers may be interested in news that has not been covered by the western MSM: https://asean.org/wp-content/uploads/2025/05/Final-Joint-Statement-of-the-ASEAN-GCC-China-Summit-27-May-2025.pdf. The rest of the world is moving on. At the press conference, China reiterated its support for a Palestinian state based on the 1967 boundaries and with its capital in (east) Jerusalem. It was hinted that Japan and South Korea may join this new bloc. It was suggested that the next gathering may include the BRICS, African Union and Mercosur. Where does that leave the west?
It did not help that Macron, on a state visit to Viet Nam and fresh from what appeared to be an altercation with his wife on the plane, made comments felt to be western stirring. Singapore’s foreign minister was diplomatic, but implied that France should mind its own business and learn how the rest of the world works. That push back has, again, not been reported.
Noted
A collective delusion has taken hold across the West. It happens sometimes. It’s happening now. Peace talks, based on a vision of a converging world, are the only real answer. The deluded will say that’s naive. It isn’t. They’ll say that we must prepare for the worst. We don’t. We need always to prepare for the best that humanity can achieve.
Thank you and well said, Cliff.
Yesterday morning, dad, who served with the RAF from 1964 – 91 and is the son and nephew of WW2 veterans, watched John Healey’s interviews and said these are the idiots, often chicken hawks, who drag countries into war.
It was the same when we watched a documentary about the French armed forces on LCI yesterday evening.
Thank you, Cliff.
You’re right about the delusion in the west. Please see a comment / reply to Matthew currently in moderation.
One good thing about China’s ban on the export of rare earth metals to the US is that it kneecaps the US war machine (and its proxies like Israel).
Agree with this, but also bear in mind Karl Popper’s tolerance paradox
There are a lot of things that would contribute to ‘defence’ eg increasing the resilience of utilities, food and agriculture policy etc that do not have any ‘agressive’ component and are worth doing anyway.
As one contributor on a Railway Modelling forum pointed out DB – German Railways dont have enough Warflats (Heavy flat railway wagons for transporting tanks) to move a single tank division – you cant move them by rail in the UK and while they have a clear military purpose they can be use for other things until needed
Highly relevant
It’s no surprise the Labour’s unerring instinct for messing up is there in the grotesquely dangerous notion of ‘modernising’ ‘our’ nuclear weapons – hinting at lowering the nuclear threshold – war-fighting with ‘tactical’ nukes. That will do wonders for the non proliferation treaty.
Then there is the 10 new nuclear attack submarines – how neatly that ties in with their utterly non feasible dedication to a fleet of small modular reactors for electricity generation . Rolls Royce will be very happy – as the SMR’s are supposedly a development of the submarine reactors.
Civil nuclear has always been supported because it is part of the military nuclear.
So Sir Keir, Keynesian economics works but only in limited areas like defence? Have you ever met an impoverished weapons manufacturer or a hard-up arms dealer?
Dear Vlad, I’m declaring war on you lot. We’re gonna kick your ass into touch, but can you please give us 3 or 4 years to prepare for your invasion.
Sincerely, Keef Strimmer (Sir).
I’m sick of being told who my enemies are. Maybe somebody should be doing some talking. The last couple of days of muscle flexing have been unbelievable – and worrying.
Thank you and well said, Kevin.
You comment made me think of what Mohammed Ali said about the Viet Nam and the draft, “I ain’t got no quarrel with them Viet Cong.”
Given what I have seen about the cost of the drones used in yesterdays attack on the Russian bomber fleet and the value of the damage it seems to me that as in WW2 lots of cheap kit wins every time
I’ll take 9 subs and the cost of the tenth directly spent on affordable housing.
Then, turn it into 8 and the cost of the ninth directly to the NHS
Perhaps 4 subs will be enough
I am not sure I follow that…
Meaning the glorious leader gets to buy a few subs but has it made clear to him that other, more important areas, need funding right now.
But he still gets to keep a few toys.
Are you watching Panorama? I thought Ros Atkins is one of the good guys at the BBC .
There will be a blogpost in the morning
I’ve just sent the following to Panorama’s email address:
Your programme tonight was, I’m afraid, based on a total lack of understanding about how public finance actually works. The fact is that all public spending by the Government is funded by money created for it by the Bank of England and issued to the Treasury in the form of debt. That debt is largely recovered by taxation. The Government does not tax and spend. It spends and then taxes. The reason there is a gap between spending and taxation is that large sums of money are effectively hoarded by citizens, businesses and pension schemes. For example there is £2 trillion or so sitting in household savings accounts. The budget deficit is balanced in the main by Government Bonds, largely as a favour to the finance industry and includes significant investment by pension funds. Without the Government debt, our nation’s pensions would probably be in real trouble. I could go on, but I hope it’s clear enough already that you really need to try again. Try talking to proponents of Modern Monetary Theory, like Professor Richard Murphy. At the very least you need to broadcast a programme that provides a balancing viewpoint, given that you are the BBC.
Kind regards
Cliff Bawden
Thanks
See post just published
Colonel Smithers is right about BlackRock’s war machine holdings. Here’s a post I made yesterday on the subject: https://dearscotland.substack.com/p/fascism-is-driving-the-wests-militarism