Bullets, Budgets and Britain’s Future

Can military Keynesianism deliver security and growth?

A strong militaristic undercurrent has defined Keir Starmer’s first year in office. As geopolitical tensions rise and alliances fray, Britain is recalibrating its stance. Hence, defence has surged to the top of the political agenda, with the 2025 Strategic Defence Review inaugurating security as the government’s “organising principle” (Ministry of Defence, 2025).

Meanwhile, Labour has pledged to increase defence spending to 2.5% of the GDP, with ambitions to reach 3% in the next parliament. The shift is visible: the aid budget has been cut, and defence is framed not just as a strategic necessity, but as an economic opportunity (Furlong, 2024). Therefore, this analysis examines whether Starmer’s embrace of military Keynesianism is a sound dual-purpose strategy or a risky gamble amid fiscal pressure and political volatility.  

Military Keynesianism

Military Keynesianism is an economic approach in which governments utilise defence spending to stimulate jobs, increase industrial output, and spur technological innovation. The model first gained traction in Nazi Germany and was later embraced by post-war U.S. administrations to maintain aggregate demand (Toporowski, 2016).

However, in the UK, the concept now underpins Labour’s defence and industrial strategy. Defence Secretary John Healey has characterised the policy as an “engine for economic growth” (Ministry of Defence, 2025), linking national security directly to economic renewal. This logic is evident in the government’s £6 billion investment in munitions manufacturing, projected to create 1,800 jobs and promoted as both an industrial stimulus and a foundation for military readiness (The Guardian, 2025).

Growth?

As shown in the provided chart, raising defence spending to 2.5% of the GDP could increase annual growth by up to 0.12%. Although the impact is modest, it supports the rationale for carefully targeted investment in high-value sectors. Additionally, in a low-growth environment, even marginal gains can carry significant strategic and political weight.

Strategic Alignment 

While investment signals intent, it does not ensure outcomes. Therefore, without oversight, capability benchmarks, and alignment with actual operational needs, defence funds risk being misallocated. Furthermore, political incentives often distort spending priorities: headline-grabbing technologies or constituency-targeted job schemes may outweigh long-term strategic needs.

For Labour, the challenge is not only to spend more, but to spend smart—ensuring that the defence strategy is driven by necessity, not expediency.

What to Watch?

In order to accurately assess the strategic viability of Britain’s defence investment, four areas warrant close attention:

•  Procurement Priorities: Beyond headline figures, the critical question is where new funds are being allocated. Are resources targeting high-impact capabilities, or spread thinly across politically motivated programmes? Consequently, misallocation here could inflate costs while leaving core capabilities underfunded.

•  Regional Allocation: The government has framed defence spending as a tool for economic regeneration. Thus, monitoring where jobs, apprenticeships, and R&D clusters are concentrated will reveal whether this agenda is nationally balanced or narrowly distributed. Moreover, uneven distribution may undermine Labour’s levelling-up narrative.

•  Delivery Risk: The Ministry of Defence has a long record of delays, cost overruns, and programme inefficiencies. Therefore, without reform, even well-intentioned investments could stall, eroding trust and wasting public funds.

•  Operational Readiness: Ultimately, strategic investment must translate into enhanced force readiness. Hence, monitoring recruitment, training, equipment deployment, and interoperability will be key to assessing real-world capability gains.

Fiscal Trade-offs and Political Messaging

Starmer frames his defence agenda as a collective national endeavour for “the security of the nation and the prosperity of its people” (Ministry of Defence, 2025). However, real-world constraints remain. The IMF warns that permanent increases in defence spending must be offset by new revenue or spending cuts elsewhere (IMF, 2024).

Meanwhile, the tension is already visible. The government’s move to reduce disability benefits prompted a significant backbench rebellion, forcing a partial U-turn and exposing cracks within Labour’s parliamentary coalition (Reuters, 2025; BBC, 2025).

Furthermore, the strategic appeal of military Keynesianism must be balanced against fiscal discipline and public expectations. However, defence spending cannot become a substitute for domestic care. If Labour’s narrative of economic credibility collapses under the weight of unpopular cuts or underdelivered promises, it risks opening space for populist challengers who frame defence as a distraction from domestic hardship.  

Starmer’s defence-driven growth agenda offers clear opportunities for industry, albeit with sharp risks. While increased spending promises contracts, jobs, and innovation, delivery depends on political stability, fiscal discipline, and strategic clarity. Meanwhile, for the private sector, exposure to delays, shifting priorities, and overpromised capability poses real commercial uncertainty. 

Military Keynesianism is not inherently flawed, though its success hinges on execution. However, without clear priorities, responsible budgeting, and delivery mechanisms, what begins as a strategic opportunity may devolve into political vulnerability. For now, it remains a calculated risk, promising near-term economic dividends while exposing the government to long-term political volatility.

Bibliography

• Chapman, J. (2025) ‘Diminished UK aid budget is “new normal”, says development minister’,  The Guardian, 17 May. Available at: theguardian.com (Accessed: 3  July 2025).
• Furlong, A. (2024) Keir Starmer’s new agenda: Big cash for defense — and the NHS. Politico, 5 July.
• London Business School (2025) Defence research fuels productivity: LBS analysis featured in Spring Statement. London: London Business School.
• Ministry of Defence. (2025) The Strategic Defence Review 2025: Making Britain Safer – secure at home, strong abroad. [PDF] London: UK Government. Published 2 June.
• Morton, B. (2024) ‘Rivals attack Farage for saying West provoked Ukraine war’, BBC News, 22 June
• Office for Budget Responsibility (2025) Economic and fiscal outlook: March 2025. London: OBR. Available at: https:// obr.uk/docs/dlm_uploads/OBR_Economic_and_fiscal_outlook_March_2025.pdf (Accessed: 3 July 2025). Reuters (2025) ‘Starmer wins vote on UK welfare reform but suffers damaging rebellion’, Reuters, 1 July.
• Taipei Times (2025) ‘Germany’s debt rules and military Keynesianism’, Taipei Times, 28 March.
• The Guardian (2025) ‘UK plans to build six weapons factories to bolster military readiness’, The Guardian, 31 May.
• Toporowski, J. (2016) ‘Multilateralism and military Keynesianism: Completing the analysis’, Journal of Post Keynesian Economics, 39(4), pp. 437–443
• Williams, G. (2025) UK military spending to rise as Labour targets ‘national resilience’. Financial Times, 2 June. Available at: https://www.ft.com/content/ebe5fd4c-964d-4cf0-b5ca-38dab911f4a3 [Accessed 4 July 2025].