Prime Minister Keir Starmer has announced plans to make Britain 'battle ready' through a strategic defence review, shifting the UK to 'war-fighting readiness' amid concerns over Russian aggression and potential US disengagement from Europe. However, questions persist over how the government will fund the increased military spending.
Starmer committed in February to raising defence spending to 2.5% of GDP by 2027, funded by cuts to the foreign aid budget. He has also expressed an aim to reach 3% in the next Parliament but declined to specify how this would be financed. The reluctance to detail funding sources has raised doubts about the feasibility of the plans.
Chancellor Rachel Reeves faces significant constraints, having ruled out tax increases on working people while vowing to protect public services from further austerity. With strict fiscal rules limiting borrowing for day-to-day spending, the Institute for Fiscal Studies has warned that 'really quite chunky tax increases' may be necessary to fund defence.
Labour MPs are already uneasy over welfare cuts and the winter fuel allowance, and next week's Spending Review is expected to reveal cuts to non-protected departments. Starmer, however, believes that increased defence spending can yield an economic 'defence dividend' through job creation in industrial heartlands, where Reform UK is gaining ground.
