Starmer’s defence spending will mean ‘chunky’ tax rises, warns IFS
Sir Keir Starmer’s plans to boost defence spending will require “chunky” tax rises, according to the chief of the Institute for Fiscal Studies (IFS).
Paul Johnson told Times Radio: “…if we’re really going to spend another £10-15 billion a year on defence, whilst inevitably we’re going to spend more and more on health and pensions and so on, you really do have to ask that question, what are the choices you’re going to make?”
“And I mean, bluntly, it really does seem to me that the only choice that is available, if we’re going to go through all of those things, is some really quite chunky tax increases to pay for it.”
The Prime Minister insisted that Britain must be war-ready as he unveiled the strategic defence review in Glasgow.
He promised the “largest sustained increase in defence spending since the Cold War,” with spending at 2.5 per cent of GDP by 2027 with an “ambition” – but not an explicit pledge – to reach 3 per cent by 2034.
The UK is one of a number of countries in Western Europe scrambling to bolster its defence spending, as President Trump backs a more isolationist foreign policy – with dwindling commitments to Ukraine.
Starmer’s defence dilemma
Keir Starmer told BBC Radio 4’s ‘Today’ programme that he would not “indulge in the fantasy of plucking dates from the air. I take the defence and security of our country very seriously, it’s the most important task I have.”
The PM is caught in a vice between pressure from the left of the Labour Party – spearheaded by deputy prime minister Angela Rayner – to back down on spending cuts, and pressure from business to spend within Rachel Reeves’ self-imposed fiscal rules by reining in spending.
New polling from Survation on Monday found that two thirds of Labour MPs would like to see the Chancellor ditch her fiscal rules, while a fifth would prefer to see tax rises over spending cuts.
The Bank of England’s former Chief Economist Andy Haldane told LBC’s Nick Ferrari on Monday morning that the UK looks like a “laggard” on defence.
Haldane said: “You know, it is directionally good that we are spending more on defence, but look, the absolute bare minimum was done to get Keir Starmer through a meeting with Donald Trump, right?” He added that to meet the PM’s spending pledges “we’ll need a bit more borrowing, a bit more taxation and a loosening of our fiscal shackles.”
Johnson emphasised that any government climb down from its cuts to the winter fuel allowance and its stance on the two-child cap would make tax rises even more likely.
“But of course, that’s not something the Prime minister or the Chancellor is actually willing to say,” he said, adding that the UK’s “very poor levels of economic growth” meant the Government had “some really, really tough choices to make”.