By Andrew MacAskill

THE HAGUE (Reuters) -British Prime Minister Keir Starmer pledged to boost overall defence and security spending to 5% of economic output by 2035 to meet a NATO target, with his government warning it must "actively prepare" for war at home for the first time in years.

NATO members agreed on Sunday to the 5% of gross domestic product target, a big increase in their defence spending, in response to U.S. President Donald Trump's insistence that Europe take more responsibility for its own security.

Heading to a NATO summit in The Hague, Starmer for the first time publicly said Britain would boost spending on defence and broader security measures to the highest level since the Cold War, but he did not say how the extra money would be funded.

Addressing reporters on the way to the two-day NATO meeting, Starmer said it was "pretty obvious we're living in volatile times, probably more volatile than most of us have lived through recently".

Britain already said this year it would increase defence spending to 2.5% of GDP by 2027 from 2.3% last year.

But the new pledge raises questions about where the estimated extra 30 billion pounds ($41 billion) a year of money will come from and the depth of curbs in other public services required to meet the target.

Starmer rejected the idea that the defence increases would have to come at the expense of government's spending on welfare, over which he is facing a rebellion.

CHINA AUDIT

In a new National Security Strategy published on Tuesday, the government warned that for the first time in many years, it must prepare for the possibility of Britain "coming under direct threat, potentially in a wartime scenario".

It said citizens should undergo "national resilience exercises" in preparation for attacks at home.

With the NATO summit likely to be dominated by reported new Israeli airstrikes on Iran despite Trump's ceasefire calls, Starmer repeated his call for de-escalation.

"I want the ceasefire to continue, and therefore, obviously, the sooner we get back to that, the better," he said.

To meet NATO Secretary General Mark Rutte's demands to increase defence spending, Downing Street said Britain would commit to spending 3.5% of national income on traditional defence and a further 1.5% on broader security.

Under the new NATO target, Downing Street said Britain expects to increase overall defence spending to at least 4.1% of GDP by 2027.

The National Security Strategy drew together six reviews since Labour won a national election last year, including inputs from a long-awaited audit of relations with China.

But in a surprise decision, Downing Street said the China audit would not be published separately because it could jeopardise national interest.

The security strategy said Britain should continue to pursue closer economic ties with China even though Chinese spying and interference had increased in recent years.

Foreign minister David Lammy told parliament China posed "a sophisticated and persistent threat" but said engaging with the country was important because, "China's power is an inescapable fact".

($1 = 0.7349 pounds)

(Reporting by Andrew MacAskill, editing by Elizabeth Piper and Alistair Bell)