The Week 7 March 2025

To say it has been another busy week in Westminster would be reductive. From DC to Brussels, virtually every government in Europe has been consumed by a week of defence spending negotiations, culminating in one of the most significant moments for the bloc’s security since World War II.

If there is one thing that keen public service reformers can learn from this intensity of diplomatic activity over the last few weeks: the peace dividend that has underpinned public service expenditure for decades may be showing signs of fracture and this should give policymakers pause.

At?Reform, we believe the post war public service settlement?no longer works, that society is experiencing profound global, demographic and technological changes. Our public sector’s operating model is ill-suited to modern needs, and the post-war peace dividend is likely to be a thing of the past.

Post war, it was clear that the development of conventional military might no longer met political or strategic objectives. Economic interdependence, nuclear weapons, the global spread of democracy all undermined the case for war. What’s more, from Suez to Vietnam, even the most powerful nations have repeatedly found themselves unable to achieve their military objectives, despite possessing superior resource. Aside from the ethical questions, it was both ineffective and inefficient.

In turn, this near global recognition of the opportunity cost of war meant the money once spent on defence was reallocated across European economies to grow modern welfare states, protected by NATO and the United States’ ongoing high levels of defence spending. A world of opportunities opened up for spending public money on public services.

And today, some argue that decades of peace have resulted in complacency and neglect of defence spending. The public purse is now clearly geared towards public services. The NHS cost?10.9%?of GDP in 2023, education?4.1%,?and welfare forecast to be?10.8%?in 2024 – 2025, while defence sits at 2.5%. In 1952, it was?9.6%.

Nevertheless, even relatively small increases come at the expense of something else. In the UK, increased defence spending is coming at the expense of?international aid. In the EU, it is coming at the expense of their ‘cohesion programme’?which aims to bridge economic disparities between EU regions. If geopolitical headwinds force more increases, more trade-offs with social policy will be needed.

Perhaps this need to unlock money will force a rethink of certain parts of the State that are well overdue reform. Perhaps it will force a reconfiguration of the public purse, rebalancing public defence and public services. Or perhaps it will do neither, and we'll continue to pay the price in taxes and borrowing indefinitely. Time will tell.

Read of the week...

Demos, the Joseph Rowntree Foundation and Grassroots Poverty Action Group published a fascinating insight into trends in online conversations about?poverty. Some of the findings are unsurprising, including that discussion of heating bills spiked in 2022 and that the Work Capability Assessment consistently has a negative impact on individuals. But as Liz Kendall ramps up the discussion on welfare spending, is it a timely, humanising and necessary insight into the day-to-day thoughts of welfare recipients online.