Increased defense spending under Starmer's leadership may lead to substantial tax hikes, cautions Institute for Fiscal Studies.
Straight Up Talk: Keir Starmer's ambition to beef up defense spending could mean some hefty tax hikes, as per Paul Johnson, head honcho at the Institute for Fiscal Studies. He told Times Radio, "If we're genuinely going to shell out another £10-15 billion a year on defense, considering we'll inevitably throw more cash at health, pensions, and the likes, it's only fair to ask, what sacrifices are we prepared to make?" He went on to say, "It's bloody obvious that the only option available to us if we're to go through all this is some hefty-ass tax increases."
The Prime Minister stands firm on keeping Britain battle-ready, announcing the strategic defense review in Glasgow. He vowed a "big-time" increase in defense spending since the Cold War, aiming for 2.5% of GDP by 2027, with a "goal" (not a guarantee) to hit 3% by 2034.
European nations, including the UK, are scrambling to fortify their military forces as President Trump embraces a more secluded foreign policy and less support for Ukraine.
Starmer's defense conundrum
Starmer said on BBC Radio 4's 'Today' programme that he wouldn't "get lost in the BS of pulling numbers out of nowhere." He stressed the importance of defending our country, "It's the most crucial responsibility I have."
Political pressure is squeezing the Prime Minister from both sides - the Labour party's left wing, headed by deputy prime minister Angela Rayner, urging a rollback on spending cuts, and the business community pushing for fiscal restraints, or spending within Rachel Reeves' constraints.
A recent Survation poll found that two-thirds of Labour MPs want the Chancellor to abandon her fiscal rules, while a fifth prefer tax hikes over spending cuts.
The Bank of England's former Chief Economist, Andy Haldane, told LBC's Nick Ferrari that the UK lags behind in defense spending. He stated, "Sure, it's progressive that we're spending more on defense, but let's be real, the bare minimum was done just to get Keir Starmer through a meeting with Donald Trump, right?" He added that to meet the PM's spending promises "we'll need to borrow some cash, raise some taxes, and bend those fiscal rules."
Johnson reiterated that any retreat from reducing the winter fuel allowance and the two-child cap would only increase the likelihood of tax hikes. "But of course, that's not something the Prime minister or the Chancellor is ready to admit," he said, adding that the UK's anemic economic growth means the Government has some real difficult decisions to make."
- The ambition of Keir Starmer to boost defense spending could potentially lead to tax hikes, according to Paul Johnson, the head of the Institute for Fiscal Studies.
- The Prime Minister has announced a strategic defense review and aims for a significant increase in defense spending, which could be funded by tax increases or borrowing.
- The Bank of England's former Chief Economist, Andy Haldane, suggested that increasing defense spending might require borrowing, tax increases, and bending fiscal rules.
- The Labour party's left wing, led by deputy prime minister Angela Rayner, is pushing for spending increases, putting political pressure on the Prime Minister to consider trade-offs between defense spending, tax policy, and personal finance.
