Prime Minister Keir Starmer is under mounting pressure to clarify whether tax increases will be necessary to finance the government's long-delayed defence investment plan (DIP), which aims to boost military spending to levels not seen since World War II. During Prime Minister's Questions on Wednesday, Starmer twice declined to rule out tax hikes, instead criticising the previous Conservative government's record on defence.
Stand-off Between Treasury and Defence Ministry
Chancellor Rachel Reeves and Defence Secretary John Healey are reportedly at odds over the scale of investment. Defence chiefs initially requested a four-year, £28 billion injection for equipment such as submarines and drones, but sources now suggest the figure has been reduced to £13.5 billion. Reeves admitted on Tuesday that “the money has to come from somewhere,” with options including tax rises, spending cuts, or increased borrowing. No10 has asked all government departments to achieve capital savings of at least 1% over the next four years.
Economic Experts Warn of Bigger Challenges
Economic analysts caution that the DIP is only part of a larger fiscal puzzle. Max Warner, senior researcher at the Institute for Fiscal Studies, highlighted that the government also faces a NATO commitment to raise core defence spending to 3.5% of GDP by 2035. This increase, he noted, is on a “much larger scale” and would require a “national conversation” on funding. If funded through taxes, Warner estimated each voter would need to pay an additional £500 per year to cover the £30-40 billion annual uplift.
Warner emphasised the historic shift: “The UK, really since the end of the Second World War, has tended to decrease defence spending as a share of GDP. Turning that around while health and welfare spending grows is a big change.” He added that the decision ultimately forces a societal choice: either accept a larger state with higher taxes or make deep cuts elsewhere.
Publication Date Remains Uncertain
Starmer has pledged to publish the DIP before the NATO summit on July 7, but no exact date has been given. Defence Secretary John Healey appeared to quash rumours of a Friday release, stating that significant reports like the DIP should be presented to parliament. This follows a warning from Speaker Lindsay Hoyle that the plan must be formally presented to MPs, which cannot occur if published on a non-sitting day.
During PMQs, Conservative leader Kemi Badenoch pressed Starmer to rule out tax rises. Starmer deflected, accusing the Tories of leaving “47 out of 49 major defence contracts delayed or over budget.” He insisted the government is “fixing” those issues and confirmed the DIP will be released before the NATO summit. Badenoch countered: “I asked him if he would rule out tax rises. He did not rule out raising taxes, so tax rises are coming.”
