Boris Johnson faces Cabinet battle over defence spending

Boris Johnson is resisting public pressure from his own Defence Secretary and the head of the Army to increase military spending amid a Cabinet split over future funding.

On Wednesday, the Prime Minister will say that the UK is spending 2.3 per cent of GDP on defence as he arrives at a Nato summit to agree an international push into eastern Europe to ward off the threat from Russia.

At the gathering in Madrid, Mr Johnson will call on other member nations to “dig deep” and increase spending targets beyond the current level of two per cent of GDP.

But his rallying call threatens to be undermined by the opposition of two senior Cabinet ministers over his refusal to increase Britain’s own budget, as well as concern that he is planning to breach a manifesto commitment to link military spending to inflation.

The Telegraph can reveal that Downing Street intervened to water down calls for higher defence expenditure from Ben Wallace in a speech delivered on Tuesday.

Mr Wallace, the Defence Secretary, was due to argue that spending just two per cent of GDP on defence was outdated. However, the line was removed at Number 10’s request.

Downing Street was said to have been left “furious” by what was seen as an attempt to bounce Mr Johnson into announcing a major defence spending increase while at the Nato summit this week.

The Treasury had not approved any rise in spending. Both Mr Johnson and Rishi Sunak, the Chancellor, have argued in recent weeks for the need for spending restraint as inflation surges.

In contrast, Olaf Scholz, the German chancellor, vowed on Tuesday to become Europe's largest defence spender, as he pledged to increase the annual budget to up to €80 billion (£69 billion).

Mr Johnson will say on Wednesday: “The Nato alliance keeps our people safe every day. But over the next 10 years, the threats around us are only going to grow.

“We need allies – all allies – to dig deep to restore deterrence and ensure defence in the decade ahead. The two per cent was always meant to be a floor, not a ceiling and allies must continue to step up in this time of crisis.”

On Tuesday, the Prime Minister knocked back calls for a defence spending boost in the UK, arguing that the current level of 2.3 per cent of GDP, including spending on Ukraine, was one of the highest in the West.

Mr Johnson said: “We're already on 2.3 per cent and I think if you look at the logic of some of the extraordinary things that the UK is embarked on, whether it's the future combat aircraft system, or the AUKUS submarine arrangements, you can see that we're making big commitments but for the decades ahead.

“We're also delivering record increases in defence spending £24 billion more - the biggest increase in defence spending since the end of the Cold War.”

However, analysis by the Institute for Fiscal Studies think tank has also revealed that the Ministry of Defence budget will actually fall from 2023 in real terms due to inflation.

In cash terms, the MoD budget will rise from £46 billion in 2021-22 to £47.9 billion, a four per cent jump.

It will then edge up to just £48 billion in 2023-24 and £48.6 billion the following year.

Ben Zaranko, economist at the Institute for Fiscal Studies, said the latest inflation forecasts suggest spending will increase just 0.9 per cent in real terms this year, once rising prices are taken into account - far less generous than the 2.3 per cent boost initially expected.

The 2.3 per cent also includes £1.3 billion of support for Ukraine, including donated military equipment, as it battles to defeat the Russian invasion.

Mr Wallace received public support from Liz Truss, the Foreign Secretary, who backed calls for more defence spending during a parliamentary committee appearance.

Ms Truss said: "I do agree with the Defence Secretary’s concerns. We have a real issue in terms of the availability of defence equipment, given the hugely increased security threat in Europe and we need to increase our industrial capacity.

"I’ve said before that the free world did not spend enough on defence post the Cold War and we are now paying the consequences.”

General Sir Patrick Sanders, the professional head of the British Army, said cuts were “perverse” and the UK must be "unequivocally prepared to fight" if Russia invaded Nato territory.

He said: "It would be perverse if the CGS [Chief of the General Staff] were advocating reducing the size of the Army as a land war rages in Europe and Putin's territorial ambitions extend into the rest of the decade and beyond Ukraine.”

Jeremy Hunt, who is widely expected to run against Mr Johnson in any Tory leadership contest, has said spending should hit four per cent of GDP.

Mr Johnson denied that the Conservative 2019 election manifesto promise that the defence budget would increase by 0.5 per cent above inflation every year would be broken.

But government figures have privately conceded it is expected not to be hit. It remains unclear how the promise can be delivered, given current spending levels and the 11 per cent inflation expected this year.

Defence 'has lived on a diet of smoke and mirrors'

Despite an initial draft of his speech being edited by No 10, Mr Wallace used his address at the Royal United Services Institute to make the case for increased defence spending in the wake of the Russian invasion of Ukraine.

Just as governments respond when the NHS has a winter crisis, “so must they when the threat to the very security which underpins our way of life increases", he said.

Mr Wallace added: "For too long, defence has lived on a diet of smoke and mirrors, hollowed-out formations and fantasy savings, when in the last few years threats from states have started to increase.

"Right now, Russia is the most direct and pressing threat to Europe, to our allies and these shores. I am serious when I say there is a very real danger Russia will lash out against wider Europe. In these days of long-range missiles and stealth, distance is no protection.

"It is now time to signal that the peace dividend is over and investment needs to continue to grow before it becomes too late to address the resurgent threat and the lessons learned in Ukraine. It is time to mobilise, be ready and be relevant."

However, The Telegraph can disclose that more explicit criticism of the current Nato and UK commitment to spend two per cent of GDP on defence was also included.

The original draft of the speech was understood to have included a line about how the two per cent promise had been struck in 2014 and that, for the next decade, it was time to do more

The line was removed after Downing Street intervened on Tuesday morning, given it had implications on spending. The intervention followed newspaper reports that Mr Wallace wanted £10 billion a year in extra military spending.

Both No 10 and No 11 were blindsided by suggestions Mr Johnson was on the brink of announcing a major increase in defence spending, according to multiple sources.