UK's Defense Spending to Shrink in Real Terms Due to High Inflation - Reports

MOSCOW (Sputnik) - The cabinet of UK Prime Minister Rishi Sunak will not cut defense spending, but it will nevertheless slump in real terms as inflation bites, a British daily reported on Saturday, citing a leading UK think tank.

According to the report, the UK Treasury is expected to announce next week that all departmental spending for the next two years will remain as agreed in the 2021 overview of spending.

The budget of the UK Defence Ministry will rise in monetary terms from 47.9 billion pounds ($56.7 billion) in 2022 to 48 billion pounds in 2023, growing further to 48.6 billion pounds in 2024. However, inflation, currently standing at 10.1%, will erode those budgets, leaving much less in real terms.

Therefore, actual defense spending will shrink in the coming years if inflation is factored in, the media said citing the Royal United Services Institute think tank.

Sunak’s predecessor, Liz Truss pledged to ramp up defense spending to 3% of GDP by 2030. New Chancellor of the Exchequer Jeremy Hunt is expected to present his fiscal statement on November 17, which may feature tax hikes and cuts in government spending, including defense, to reduce the budget deficit.

On November 3, the Bank of England raised the benchmark interest rate by 75 basis points to 3%, which is the highest level since October 2008, when it was 4.5%. The regulator projects the UK economy to remain in recession throughout 2023 and the first half of 2024.

In October, the UK Office for National Statistics said that the annual inflation in the United Kingdom in September accelerated to 10.1% from 9.9% a month earlier, which is the highest figure in the country's history since February 1982. Inflation is projected to grow further to 11% in the fourth quarter of 2022.