Former Defence Secretary Sir Ben Wallace accuses the Government of inflating military spending figures by counting billions allocated to Britain’s intelligence agencies, raising serious questions over Labour’s promises to strengthen the Armed Forces.
Labour’s claims to be delivering the biggest increase in defence spending since the Cold War have come under serious scrutiny after former Defence Secretary Sir Ben Wallace accused the Government of artificially inflating its military budget to make its NATO commitments appear more achievable.
The Office for Statistics Regulation, part of the UK Statistics Authority, has confirmed it will examine concerns raised by Sir Ben over how ministers are presenting Britain’s defence expenditure.
The allegations, first reported by The Telegraph on Monday (26 October), centre on the Government’s decision to include billions of pounds allocated to MI5, MI6 and GCHQ in its calculations of NATO-qualifying defence spending.
The controversy raises a fundamental question for Labour: is the Government genuinely delivering more money to Britain’s Armed Forces, or simply changing what it counts as defence spending?
Billions added to defence figures without going to the Armed Forces
According to The Telegraph’s investigation, Sir Ben has challenged Treasury changes that will allow expenditure from the Single Intelligence Account, which funds Britain’s three principal intelligence agencies, to be counted towards NATO defence spending from 2027-28.
The account represents approximately £5 billion annually, with Treasury documents confirming a planned allocation of £5.1 billion for 2027-28.
Sir Ben argues that its inclusion creates a misleading impression of how much additional money is being directed towards the military itself.
Under the Government’s calculations, NATO-qualifying defence expenditure is expected to reach 2.7 per cent of GDP in 2027-28.
However, Sir Ben claims spending directly through the Ministry of Defence would amount to approximately 2.3 per cent.
The distinction matters because NATO defines defence expenditure primarily as spending intended to meet the needs of national Armed Forces, allied forces or the alliance itself.
While certain expenditure outside defence ministries can qualify, NATO’s published rules do not provide a blanket exemption allowing all civilian intelligence activity to be counted as military expenditure.
Whether the Government’s proposed treatment of the intelligence budget satisfies those rules is now central to the dispute.
Sir Ben has also accused ministers of using inconsistent comparisons, presenting figures that include additional categories of spending alongside earlier budgets calculated on a different basis.
Such comparisons, he argues, risk overstating the scale of the increase in resources available to the Armed Forces.
‘An insult’ to Britain’s servicemen and women
In his complaint to the statistics watchdog, Sir Ben delivered a damning assessment of the Government’s approach.
He wrote: “As the world gets more unstable and our allies start spending real cash increases in their budgets, Britain seems to be falling behind.”
He went on to accuse ministers of presenting rising defence spending figures while the day-to-day resources available to military personnel remain under pressure.
Sir Ben also claimed that earlier attempts by the Treasury to count expenditure outside traditional defence budgets had been resisted during his time in government.
His accusations are particularly damaging for Labour because the party has repeatedly portrayed its defence commitments as evidence that Britain is rebuilding its military strength following years of Conservative government.
Yet the question now being asked is whether some of that apparent increase represents genuinely additional military capability, or money already being spent elsewhere in Whitehall.
Town centre improvements and export loans counted in defence announcements
The dispute extends beyond intelligence expenditure.
Sir Ben also challenged a £2.2 billion announcement made by Rachel Reeves in 2025, when she was Chancellor.
According to The Telegraph, the package included £200 million towards regeneration and employment initiatives in Barrow-in-Furness, home to Britain’s nuclear submarine construction industry.
A further £2 billion involved increased lending capacity through UK Export Finance to support overseas customers purchasing British defence equipment.
Although both initiatives may support the country’s wider defence industrial base, Sir Ben questioned whether they could legitimately be presented as direct military expenditure under NATO’s rules.
The distinction is considerable.
Supporting defence manufacturers, financing overseas purchases and improving the infrastructure of communities associated with military production are not necessarily equivalent to purchasing equipment, recruiting personnel or improving operational readiness.
Sir Ben has also questioned the Government’s £15 billion Defence Investment Plan, arguing that some of the money described as additional investment comes from asset sales and reallocations within existing spending programmes.
The Treasury’s own published funding breakdown confirms that the package includes planned savings, asset sales and the reprioritisation of existing resources, alongside new funding.
This does not mean the entire programme is fictitious. It does, however, underline the importance of distinguishing fresh Treasury funding from money generated through savings or moved between budgets.
Statistics watchdog considers complaint
The Office for Statistics Regulation has now confirmed that Sir Ben’s concerns will be considered.
A spokesman told The Telegraph: “We can confirm that the Office for Statistics Regulation will consider the concerns that have been raised with us in relation to the presentation of UK defence spending by the Government.”
The watchdog’s involvement is significant, although its consideration of the complaint does not establish that ministers have falsified official figures or breached statistical rules.
Labour has consistently described its planned increase in defence spending as the largest sustained rise since the Cold War.
However, the controversy comes as Britain’s NATO allies face growing pressure to strengthen their military capabilities amid increasing international instability.
At the NATO summit in The Hague in 2025, member countries agreed to work towards spending 5 per cent of GDP on defence and related security measures by 2035.
This comprises 3.5 per cent for core defence requirements and a further 1.5 per cent for broader security-related investment.
For Britain, the challenge is therefore not simply to announce larger headline figures but to demonstrate that additional spending translates into genuine military capability.
Labour hits back at former Defence Secretary
The Government has rejected Sir Ben’s criticisms, accusing the Conservatives of leaving Britain’s Armed Forces underfunded.
Defence minister Luke Pollard told The Telegraph: “It takes some brass neck for a former Conservative defence secretary who admitted his own party ‘hollowed out and underfunded’ our Armed Forces to complain about a government fixing that failure with the biggest sustained increase in defence spending since the Cold War.”
A Government spokesman also defended the figures, insisting Britain’s calculations complied with NATO requirements.
The spokesman said: “We are delivering the largest sustained increase in defence spending since the end of the Cold War, investing nearly £300bn over the next four years.”
The Government maintains that its defence expenditure is calculated according to NATO’s existing definition and that Britain remains the alliance’s third-largest defence spender in cash terms.
Its published Defence Investment Plan forecasts Ministry of Defence expenditure of almost £298 billion across the four financial years from 2026-27 to 2029-30.
Ministers therefore dispute the suggestion that their spending commitments are merely an accounting exercise.
Britain’s defence cannot be strengthened by accounting changes alone
The disagreement now leaves Labour facing uncomfortable questions about the transparency of its defence promises.
Britain’s intelligence agencies perform vital work in protecting national security. Their funding is important, particularly as the country confronts growing cyber threats, espionage and hostile foreign activity.
But financing intelligence operations is not automatically the same as increasing the resources available to soldiers, sailors and air personnel.
Nor does allocating funds to regeneration projects or export financing necessarily mean that Britain’s front-line military units receive additional equipment, personnel or operational support.
These distinctions are especially important when ministers use headline defence spending figures to reassure the public and Britain’s NATO allies that the country is becoming better prepared for future conflict.
With the Government’s next Budget due on Wednesday (28 October), Sir Ben’s complaint has placed renewed pressure on Labour to publish a transparent breakdown showing precisely which expenditure is being counted towards NATO commitments.
The Government insists the money is real and the figures legitimate. Sir Ben argues that the presentation risks exaggerating the improvement in Britain’s military resources.
The statistics watchdog has yet to determine whether his concerns are justified.
Until the calculations are independently examined, the accusation that Labour has falsified defence spending remains an allegation rather than an established finding.
But for a Government that has made rebuilding Britain’s Armed Forces a central promise, the demand for transparency is difficult to dismiss.
Britain’s servicemen and women need properly funded forces, not simply impressive figures on a Treasury spreadsheet.
