Secretary General Jens Stoltenberg revealed there was a real-terms increase of 3.9% last year.
Formed in the aftermath of the Second World War, NATO's original goals were to secure peace in Europe, promote co-operation among its members and counter the threat posed by the USSR, also known as the Soviet Union.
Article 5 sets out:
"The Parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all."
Article 3 adds:
"Parties, separately and jointly, by means of continuous and effective self-help and mutual aid, will maintain and develop their individual and collective capacity to resist armed attack."
The alliance does not have its own forces, but instead co-ordinates each member's contribution of their own forces.
NATO hopes that, taken together, these add up to more than the sum of their parts.
There is also an obligation, albeit not legally binding, on each of the 30 member states to spend at least 2% of their gross domestic product (GDP) on defence.
The UK is one of only 11 that currently meets that target.
Some critics argue this is not very useful as a measure of military capability; not considering the likes of expenditure in real terms or actual output.
However, it has served as a means by which the commitment of member states to the NATO security cause can be debated and assessed.
Defence expenditure accounts for current and capital expenditure on militaries, as well as Armed Forces and civilan personnel.
How has the alliance's expenditure changed through the years?
Post-Second World War
Wars have a major influence on how much money a country allocates to its expenditure on defence.
In the initial years following the end of the Second World War, NATO members spent a relatively high proportion of GDP on defence in the period between 1949 and 1959.
In 1949, the UK spent £779 million on defence - which is roughly £28.15 billion today, adjusting for inflation. In 2019, the United Kingdom spent £46.51 billion, albeit with a greater GDP.
British expenditure rose in the period from the end of the 1940s into the early '60s, with £1.81 billion spent in 1962.
When comparing the expenditure of NATO's European member states and that of NATO North America (US and Canada) in the same timeframe, the latter generally outweighed the former.
This difference was at its greatest in 1952, when the US and Canada spent nearly five times as much - US$49.47 billion compared with NATO Europe's US$10.23 billion.
Watch: NATO's Secretary General announces the increase in defence spending, earlier this year.
However, the figures must be viewed in the context of changing membership through time.
NATO only had 12 members at the very beginning in 1949 – Belgium, Canada, Denmark, France, Iceland, Italy, Luxembourg, Netherlands, Norway and Portugal, the UK and USA.
Turkey and Greece were admitted in 1952, with West Germany added in 1955. An increase in member numbers, can, of course, increase totals.
From the 1950s until the mid '60s, the gap between total NATO North America spending and total NATO Europe spending generally increased.
In 1954, total European expenditure was US$11.75 billion, whilst the North American figure was US$44.56 billion - a difference of US$32.81 billion.
In 1966, the respective figures were US$21.51 billion and US$65.21 billion - a difference of US$43.7 billion.
However, both North American and European spending generally increased in that time, against the backdrop of the Cold War and, more specifically to the United States, the nuclear arms race with the USSR.
70s and 80s flux
From the mid 1970s to the mid 1980s, (1975 to 1984), UK expenditure on defence increased steadily from £5.17 billion in 1975 to £16.92 billion in 1984.
In the same period, the United States also stepped up its spending from US$90.94 billion in 1975, to US$237.05 billion in 1984; the latter years in this period coincided with a late intensification in Cold War tensions.
Member states' total expenditure generally increased through the period, but so too did relative spending as a percentage of GDP. In 1980, the UK spent 5% of GDP on defence, rising to 5.3% in '84.
Not all member states followed exactly the same pattern, however - Belgium's spending relative to GDP fell slightly from 3.4% to 3.2% in the period.
However, the percentage decrease can be misleading, if GDP growth outweighs a real increase in defence spending.
The period from 1986 to '89 saw a general decrease in the percentage of GDP spent on defence.
The UK's figure fell from an average of 5.2% (1980-84) to 4.6% (1985-89) with a low of 4.2% in '89.
However, the North American figure rose from an average of 5.5% (1980-84) to 6% (1985-89), principally because of a US increase from 5.8% to 6.3% in the same period.
The NATO Europe average also slightly declined - from 3.6% to 3.3% in this time.
After the Cold War ended in the early 1990s, spending dropped as tensions between countries in eastern Europe were reduced, helped by the onset of democratic governments.
UK spending relative to GDP fell from an average of 3.8% (1990-94) to a figure much closer to the NATO present day target of 2% by 1999 - 2.5%.
Turkey had the highest relative percentage by the end of the decade - 5.4% in 1999, followed by Greece's 4.8%.
At the other end of the scale, Luxembourg's figure was 0.8%, but this had not changed significantly from a figure of around 1% in 1980.
However, significant and consistent cuts to proportionate defence spending have thrown into question the alliance’s ability to be ready to respond to crises, and to provide adequate security guarantees.
Commentators argue that European states have increased their dependence on the United States as their spending has decreased. Debate has raged about who is ultimately responsible for European security – Europeans or Americans, or indeed a combination.
US permanent troop presence in Europe has been on the wane, however, in February, US President Joe Biden announced the country would end its planned withdrawal of troops from Germany.
His defence secretary Lloyd Austin then said 500 more American military personnel will be deployed to Germany in a bid to strengthen bilateral ties.
According to Jan Techau, Carnegie Europe, writing in September 2015, a vacuum of European security could be exploited by hostile actors.
Techau said the vacuum "is most profoundly visible in Europe’s East, where NATO territory is most directly exposed".
The Foreign Secretary earlier this year said he was "gravely concerned" about reports of the Russian military gathering on the Ukraine border.
The country's east has seen recent clashes between Ukrainian forces and separatists backed by Russia.
In 1999, NATO welcomed the Czech Republic, Hungary and Poland to its membership.
Pre-financial crisis and noughties
Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia joined in 2004, five years ahead of Albania and Croatia.
NATO Europe's average spend decreased slightly from an average of 1.9% (2000-04) to 1.7% in 2009.
Contrastingly, the NATO North America average climbed to 5% in 2009, from 3.2% (2000-04). This, in turn, helped NATO's overall average to climb from 2.6% at the beginning of the noughties, to 3.3% by the end of the decade.
For eastern European states neighbouring Russia, in general, spending relative to GDP is above 2%. The 2020 estimates have Estonia at 2.33%, Latvia at 2.27%, Lithuania at 2.13%, Poland at 2.31% and Romania at 2.07%.
These Allies, however, have national laws and political agreements which call for 2% of GDP to be spent on defence annually, NATO says.
Ukraine, a NATO partner state, was given verbal support amid a build-up of Russian forces on its border earlier this year.
Dozens of warships, hundreds of aircraft and thousands of troops caught international attention, following 2014's illegal annexation of Crimea. Moscow then ordered its troops to pull back.
Just last month, it was announced that the Russian military will form 20 new units in the country's west this year to counter what it claims is a growing threat from NATO.
Tensions have run high between the two nations since February 2014, when Crimea was annexed by Russia.
Several months later, NATO held a summit in Wales.
The alliance sought to reassure eastern member states, as well as Ukraine, of collective defence.
NATO adopted a range of measures at the event, including the Readiness Action Plan, which is designed to enhance the deterrent presence of NATO forces in eastern Europe.
Member states also pledged to attain the 2% spending target within a decade.
The year 2019 marked the first time more than half of the alliance’s members achieved more than 1.5%.
According to the latest official estimates, for 2020, the number of NATO nations meeting or exceeding the alliance's target of spending 2% of their gross domestic product (GDP) on defence has increased.
The UK, one of 11 nations believed to be hitting the target, is fourth in the list of proportional spending, while the Slovak Republic has joined those who are on track.
A real change estimate increase of 2.69% spending within the military alliance has seen members contributing more.
NATO data estimates there has been a UK defence spending boost in 2019 from 2.1% to 2.32%.
Montenegro became a NATO member in 2017, whilst North Macedonia was added in 2020.
Is the 2% target appropriate?
Speaking in 2019, Anthony H Cordesman, who holds the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies, argues that the significant focus on proportionate spending runs the risk of diverting attention from the more important goal of ensuring cohesion against the potent Russia threat.
Taking 2018 as an example, Mr Cordesman highlights that NATO Europe alone spent more than four times what Russia did on defence forces. NATO Europe spent $276 billion, whilst Russia and Belarus spent $64.1bn (Russia alone spent $63.1bn).
He thus stresses the importance of the alliance concentrating on how to utilise its vastly superior resources to those of Russia. Furthermore, he notes how the success of one country to attain the numerical targets of GDP and equipment, can be compromised by the relative weakness of its neighbour.
Some critics say overall government spending should instead be the metric.
Is the 2% target perhaps misleading? Critics suggest the failure of a member state to attain the number could be misconstrued as a lack of willingness, not considering other factors such as the 10-year target of achieving this by 2024.
There are additional concerns that some may not be trying to reach the target in the time frame. It is unlikely that those governments who signed up to it, are likely to still be in power by 2024. Shrinking economies, Techau points out, can enable states to improve their percentage without doing much to increase expenditure.
A decline in military spending, as a share of GDP, must also be seen in the context of growing GDP – this has recently increased. Therefore, absolute military spending has not necessarily decreased in all cases.
Cover image: Spanish Air Force FA18 Hornet aircraft in Baltic for NATO Air Policing Mission (Picture: NATO).