The Strategic Defence Review: military Keynesianism and the fallout for universities

The Strategic Defence Review is about tanks, AI, missiles, and artillery, but it is also an analysis of the UK’s economic capabilities and priorities.

The IFS has said that the proposed increase of £10-15bn per year on defence will mean “chunky” tax rises elsewhere. Politically, that might be a reasonable price to pay for new ships, drones, cyber capabilities, and a “10x more lethal British Army” but it will come at a cost.

Clearly, one of the many benefits of peace time is that it allows governments to spend less on war. In recent years, real time spending on defence has fallen which has allowed the government to spend on things like public services and education. Now, spending on defence will (probably) hit three per cent of GDP by the next Parliament which means difficult choices elsewhere.

The review hints at what these difficult choices may be. Its economic premise follows the ethos of the government. Fiscal restraint, education provision focussed on skills, and research investment where it can crowd in further investment and improve regional economies.

The government’s position is that the investment in defence will pay for itself as a kind of “military Keynesianism.” This demonstrates flexibility in spending for growth in a way that is more expansive than the Chancellor’s measures so far have suggested. After all, it’s not necessarily the case that military spending has some special power to stimulate demand above other kinds of public spending.

If the political reality is that spending can be justified where it is about national security and has a demonstrable economic return, the winners in future spending decisions will be providers offering technical training and those offering advanced qualifications in areas like cyber. And in research the winners will be the places, providers, and projects that make the country militarily, either through conventional weapons, cyber warfare, or through organisational effectiveness, more secure.

Specifically, it is noticeable that in the opening of the document the discussion of “innovation-led” rearmament refers only to private sector innovation. The ambition is not only that existing defence firms become more innovative but civilian firms with dual-use technologies can benefit from an increase in defence spending.

Procurement on its own is not the answer to the UK’s national security. The future of the UK’s defence ecosystem will require new skills to work across various defence industries aligned to a new Defence Industrial Strategy. There is the usual lament that there are not sufficient STEM graduates and the less usual call that:

The MOD should work with the Department for Education, DSIT (including directly with UKRI), and universities to invest in science, technology, engineering, and mathematics, and other specialist skills.

UKRI and the Department for Education, of course, already invest significantly in science, technology, engineering, and mathematics. Assuming UKRI’s budget will not increase in the spending review this either implies more funding toward STEM at the expense of other areas or a greater alignment of the MOD’s work with UKRI.

In research, there are promises of using existing internal defence spending more strategically to encourage capacity building in universities. The implication is that if universities invest in defence research the government will find ways to support their long-term success. It may be that there are some longer-term funding settlements for areas like the Defence Research and Evaluation Organisation mooted in the review. There are also promises of easier commercial partners and a role for “one or two” universities as trusted advisors to the Defence Research and Evaluation Organisation

The wider economic hope is that investment in defence will help regions to cluster together expertise. In a case study citing Barrow, it’s suggested that if public investment with private partners can be leveraged correctly it will be possible to crowd in further investment boosting places, wages, and the economy as a whole.

The review makes clear that the UK is entering a different age of public spending. The priority for the government is defence. In order to achieve this priority it is willing to invest public money where it will have a return. The providers that can demonstrate their contribution to security through skills, research, and responsible mutually beneficial collaborations, have a new opportunity to engage government and in a time of financial difficulty grow their impact.