Defence chiefs reject claim spending has fallen below Nato target level

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The Ministry of Defence has rejected claims from a defence think tank that Britain's military spending dipped below the Nato target of 2% of GDP last year.

A high-profile report by the International Institute for Strategic Studies put the figure for 2016 at 1.98%, blaming the shortfall on the effect of the British economy growing faster than the defence budget.

But the MoD branded the figure "wrong", pointing to official Nato statistics which put the UK's defence spending for 2016 at 2.21%.

A Ministry of Defence spokesman said: "These figures are wrong: Nato's own figures clearly show that the UK spends over 2% of its GDP on defence.

"Our defence budget is the biggest in Europe, the second largest in Nato, and it is growing each year as we invest £178 billion in new equipment and the UK steps up globally, with new ships, submarines and aircraft over the next decade."

Although the shortfall claimed by the IISS is small, it has the potential for political embarrassment, as the UK has repeatedly urged other Nato members to meet the 2% target.

Prime Minister Theresa May trumpeted the UK's record of hitting the 2% figure during her recent visit to Washington to meet US President Donald Trump, who has complained of European Nato members failing to pay their fair share for collective defence arrangements.

The 1.98% figure was contained in the IISS annual Military Balance report, unveiled a day before a meeting of Nato defence ministers - including the UK's Sir Michael Fallon - in Brussels.

Launching the report, IISS director general John Chipman said: "In 2016, only two European Nato states - Greece and Estonia - met the aim to spend 2% of their GDP on defence, down from four European states that met this measure in 2015.

"The UK dipped slightly below this at 1.98%, as its economy grew faster in 2016 than its defence spending.

"Nonetheless, the UK remained the only European state in the world's top five defence spenders in 2016.

"If all Nato European countries were in 2016 to have met this 2% of GDP target, their defence spending would have needed to rise by over 40%."

But the MoD said that it was for Nato to judge whether member states had met their defence investment pledge, and pointed to an official assessment released by the military alliance in July last year, in which the UK - on 2.21% - was one of five countries to meet the 2% figure in 2016, along with the US (3.61%), Greece (2.38%), Estonia (2.16%) and Poland (2%).

The MoD said the IISS calculation may have been affected by fluctuations in exchange rates, as the think tank presents spending figures in US dollars - which rose sharply against sterling in 2016 in the wake of the referendum vote for Brexit.