The UK Government has outlined plans to maintain Nato’s defence spending target of 2% of the gross domestic product (GDP) over the next five years.
The commitment will be accompanied by a 0.5% rise, above inflation, in the Ministry of Defence’s (MoD) budget every year up until 2020 to 2021.
The MoD will also receive up to an additional £1.5bn a year by the specified timeframe to fund increased spending on the military and intelligence agencies.
UK Chancellor George Osborne said: "Britain has always been resolute in defence of liberty and the promotion of stability around world.
"And with this government it will always remain so. So today I commit additional resources to the defence and security of the realm."
According to the figures released by the Nato last month, Britain, along with Estonia, Greece, and the US, was among the four members to have met the alliance’s 2% GDP mark for 2014.
Despite spending 2.1% of national income on defence last year, the British Government had declined to commit to the target beyond the next financial year.
UK Chief of the Defence Staff General Sir Nicholas Houghton was quoted by BBC as saying that the pledge would enable the armed forces to ‘start building back’ by offering them positive choices for the future in counter terrorism and warfighting capability domains.
"We’ve taken some capability risk over the last five years, now is the time we start building back."
The US has hailed the pledge and urged all Nato members to do the same. The alliance had predicted a fall in spending by 28 members this year, while launching its annual report on their defence spending in June.
Osborne also committed to maintaining the size of the army at 82,000, and noted that the budget for the overall counter-terrorism effort, valued at more than £2bn spent by a range of departments, agencies, and the police, will be protected.