
The Irish Times view on UK defence spending: a splurge of military spending
This week's
publication by the British government
of its long-awaited strategic defence review (SDR) marks the beginning of the most significant reform and upgrading of the UK's armed forces and defence since the second World War. The report, commissioned by prime minister Keir Starmer on accession to office, is a response to the dramatically changed security environment since Russia's invasion of Ukraine, the perceived threat Moscow poses to Nato allies, and Donald Trump's insistence on Europe paying its share of the costs of its own defence. The initial commitment is to increase defence spending to 2.5 per cent of GDP this year, with an eventual target of 3 per cent.
The purpose of the SDR is sobering. It is to 'increase national warfighting readiness'. It commits to a £15 billion investment in new nuclear warheads, and to 12 new attack submarines estimated at £2.6 billion each. Although land forces are not expected to increase, the report argues their lethality can be increased tenfold 'by harnessing precision firepower, surveillance technology, autonomy, digital connectivity and data,' in part learning from Ukraine.
Nato ministers, moving in lock step with the UK, met on Thursday to ratify the organisation's defence spending target for members at 3.5 per cent of GDP.
The SDR recommendations, accepted in their entirety by the British government, will cost some £67.7 billion by the end of the 2030s, posing huge challenges at a time when the government faces massive problems balancing its budget. Most controversially, the first casualty will be the slashing of the UK's international aid budget .
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Ireland's defence establishment will note that a major part of the UK's strategic shift will be away from building expeditionary forces in favour of enhancing domestic protection, specifically by focussing on north Atlantic naval patrols to guard against Russian submarines. Ireland's vital underseas cable networks should receive added protection – and pressure will come on the Government here to contribute to this effort.
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Irish Times
12 hours ago
- Irish Times
Russian attack on Ukraine's Kharkiv kills at least three in ‘most powerful' strike since start of war
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Irish Times
14 hours ago
- Irish Times
The Irish economy grew by 22% over the past year. Yes, you read that right
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As has been long discussed the headline economic data is entirely distorted by the activities and tax planning of a small number of very big US tech and pharma companies. From time to time, this has created huge distortions in the figures. A decade ago, top US economist Paul Krugman famously described a 26 per cent GDP growth rate reported for the Irish economy (later revised up to over 30 per cent) as 'leprechaun' economics . At the time the figures were distorted by massive tax-driven investments by the companies concerned, including Apple, essentially a manoeuvre by the companies involved to try to keep their tax bills down as international rules changed. READ MORE Now, as one observer put it, we are seeing another 'Krugman' moment. This time the reasons are different. Big pharma companies have been rushing product over to the US to try to get drugs and key ingredients into the market before Donald Trump announces tariffs on the sector. This has led to a surge in exports, feeding into the GDP data. Many of these are manufactured here – and some are made elsewhere but organised by Irish subsidiaries and so also show up in our figures. And so we see a massive surge in Irish GDP in the first quarter of this year. A big – temporary – decline in pharma exports in GDP will follow at some stage, as the firms involved must now have massive stocks jammed into every free warehouse in the US. Much will depend on how the tariffs story plays out. [ Welcome (back) to the era of Leprechaun economics Opens in new window ] Whether Krugman renews his leprechaun offensive or not, let's not pretend this won't be noticed. Ireland's GDP data is not some irrelevance in a quirky economic corner. The amounts of money being moved through Ireland are now enormous. Daniel Kral, chief economist at Oxford Economics , calculates that Ireland – which accounts for 4 per cent of the euro zone economy – accounted for half its total growth over the past year. Analysts have taken to looking at the figures 'excluding Ireland'. How do we pull back from all of this to judge the underlying health of the economy? Total demand in the domestic economy – adjusted by the CSO to remove the multinational factors - rose just 1 per cent over the year. But we need to look under the surface here, too. Consumer spending, a good measure of how we feel, was up by a decent 2.5 per cent. But the overall figure was dragged down by a fall in business investment, presumably reflecting the international uncertainty. So households continued to spend in the first part of the year, but businesses are taking a wait-and-see approach to big capital spending. This is likely to be reflected in the jobs market as the year goes on – and here AI is also changing the game in many sectors. Consumers may get more cautious too. Uncertainty is starting to slow the economy and this is a trend we need to watch as the year goes on. The piece of data that seemed a bit out of line this week was a 30 per cent fall in corporation tax in May compared with the same month last year. This was affected by the comparison with a strong May last year – which the Department of Finance suggests was boosted by once-off factors. Two of our biggest taxpayers, Pfizer and Microsoft – pay significant amounts of tax that month. But the key early indicator for most of the big companies is June – and what happens here will give a good pointer for the year as a whole. The figures do underline one point. It is our huge reliance on the opaque affairs of four or five massive companies – and our exposure to the sectors they operate in, their own performance and complex decisions on how their tax structures are set up. Our latest bout of data exceptionalism again puts Ireland in the spotlight, when it would have been better to keep the head down. It underlines the outsize take Ireland is getting from pharma and tech activity in the EU – both contentious points in the White House. Notably, the US added Ireland to an economic watch list this week, based on the size of our trade surplus. We are very much on the radar in Washington. Our corporate tax take and manufacturing base are looked on enviously not only from the US , but from elsewhere in Europe. [ 'No long-term commitments to anything' – Ireland's economy is experiencing a silent slowdown Opens in new window ] The advance shipping of products again focuses attention on the scale of activity and tax planning in Ireland by big pharma companies. And this causes a rollercoaster of cyclical activity. But what really counts is longer-term, structural issues. Will these pharma giants decide over time – and it would take years – to relocate some of their production to the US? Will their profits and thus tax payments here be hit by Trump's policies? Or will they – or some of the tech giants – alter their corporate structures so that they pay significantly less tax here? It comes down to whether Trump's policies change the way the economic and corporate world operates fundamentally, a fair bit or not much at all. As Ireland benefits from the current system so much, the more it changes, the more risks there are for us. The coming months will tell a lot.

Irish Times
15 hours ago
- Irish Times
Nine-figure payouts to Ryanair and Starbucks CEOs are controversial, but Michael O'Leary can point to results
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