The generals don’t know whether to cheer or cry. This time each year, they restage the battle of Waterloo, with the Treasury as the dastardly French. Old comrades and chiefs of staff are summoned to the colours, to gallop through the letters pages and on to the BBC. This month the call is to increase defence spending from 2.1% of GDP to 2.5%, or even 3%. Suddenly to their rescue have come, of all people, Vladimir Putin and Donald Trump.

To anyone seriously concerned with world peace, a possible rapprochement between a belligerent United States and a paranoid Russia is good news. Even better, it might spark a long-overdue review of Nato and its purposes. But to the generals, it is grist to the mill. Suppose the US got into bed with Russia? Suppose Britain faced war on two fronts? And look at Korea, and China, and jihadists everywhere. Give us 3% at once, they cry, or we are doomed.

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This is project fear as surrealism. No armed force threatens the United Kingdom, or has done for more than half a century. The idea that British nuclear missiles and “global reach” have kept our islands intact for that time is rubbish. So the generals battle with the Treasury about being a “tier-one power” and “global influence for good”, requiring “full-spectrum capability” and a “seat at the top table”. Sources tell me that when Theresa May, who mercifully still supports the Treasury, asked the defence secretary Gavin Williamson what “tier one” actually meant, he had no answer. The emperor’s clothes were made of cliches stitched with jargon.

Last month the public accounts committee declared Williamson’s department out of control of its budget. It had recklessly overspent, on aircraft carriers, faulty destroyers and American F-35 jets. It is blowing £31bn on four new Trident submarines, with little support even among the generals.

Yet all Williamson can do is threaten rebellion if he does not get an extra £4bn at once. This money will go straight to the defence suppliers, heavily staffed by Ministry of Defence alumni. Britain already spends the agreed Nato share of 2% of GDP on defence. This wholly arbitrary level was fixed by Nato planners on the thesis that hurling vast sums at defence suppliers would terrify any enemy. Yet when the generals’ convener, the former defence chief Lord Houghton, was asked to justify another 1% of GDP, he could only say it was because the Americans wanted it “in their heart of hearts”. This is not security, but theology.

The thesis that money equals defence is false. Britain’s recent wars have all been aggressive, not defensive. In Afghanistan, Iraq and Libya, they have been against poor, ill-equipped enemies, none of them with ships, planes or heavy armour. Britain spends more than any European country on defence, but this has merely encouraged governments to engage in foreign intervention on the flimsiest of excuses. When troops hit the ground, they are defeated by men with beards and AK-47s, leaving behind only chaos and destruction. For £40bn a year, the MoD has delivered appalling value for money.

Yet still it wants more. When Boris Johnson visited Afghanistan to escape his Heathrow fiasco this week, it was reputedly to pledge another 500 soldiers to Britain’s most costly and senseless war. What has this to do with “keeping Britain safe”?

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Galling though it might seem, May and Trump are at last asking the right questions. What are modern armies for, other than self-promotion? What should be the future of the Nato alliance? Might soft power, plain-speaking and even realignment prove a more helpful path to peace? The present tension with Russia is largely due to Nato recklessly pushing its border eastwards after 1989. To assume that the US’s nuclear umbrella would always cover this advance was unwise. Yet to pretend that a British deterrent is a substitute for an American one is absurd.

If armed conflict erupts in Europe, it will be over messy borders and disputed strips of territory. Washington will not commit great armies to Europe merely because a Moscow tank has arrived in a Russian-speaking Baltic town, any more than it did in Ukraine. No serious person can anyway imagine Nato fighting a massed confrontation with Russia in central Europe, let alone at the behest of an Erdoğan of Turkey or Orbán of Hungary. The lesson of history is that Europe has to live with Russia, good or evil. If it goes to war, Russia wins.

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Arguments between states today are about cyber-attacks, trade wars and economic sanctions. If the US was to demand, as it reasonably might, that Europe set up its own joint firefighting force, as it failed to do in Kosovo, it would require just a few brigades per country. This week in Luxembourg, nine EU states set up a “military intervention force” for rapid deployment in the event of a crisis. I am told it is the 10th such attempt since 1954. Perhaps Trump might make it happen.

Britain’s defence structure is Ruritanian, drenched in ceremonial, institutional history and abstract nouns. It still boasts “three services” and talks of “global force projection”. Lacking coherent threats, Britain’s generals have to dream up “unknown unknowns”. The rest of Europe gets by without a global presence. Britain appears not to know how.

A modern state needs domestic policing and homeland protection. It needs air and sea coastguards and a reserve for emergencies in cooperation with its neighbours, EU or no EU. The rest of Britain’s military edifice can be left to central casting. The current row over defence spending and the impending dust-up at Nato may leave much blood on the carpet. It will be well worth it if afterwards someone sits down quietly, ignores the ballyhoo, and asks how much money Britain really needs to protect itself. The answer might be refreshing.

• Simon Jenkins is a Guardian columnist