Rachel Reeves has indicated the government could raise taxes to fund an increase to defence spending, amid growing concerns over Britain’s ailing military in the face of mounting global threats.
The chancellor ruled out borrowing more to fund the government’s multibillion-pound defence investment plan – expected to be published in the coming weeks – instead indicating that she would rather raise taxes and warning that pressures to fund defence are “only going in one direction”.
Speaking at the annual Peel Hunt FTSE 250+ Conference in London on Tuesday, the chancellor said: “We are in a constrained fiscal world, and I think we’ll be honest about that, and we’re going to have to spend more on defence.”
“I would argue that despite the pain of higher taxes, better to do that than to get into a situation that we were in before, where we had interest rates climbing and the risk premia for the UK climbing too,” she said.
Ms Reeves added: “The first duty of the government is to keep its people safe, and in the world in which we live today, it’s increasingly clear that the US and other European countries are going to have to spend more on defence, but crucially spend that money better.
“The money has to come from somewhere, and borrowing cannot always be the answer.”
The government has said the Defence Investment Plan (Dip), which will detail long-term funding and strategy for the armed forces, will be published before the Nato summit in Ankara, Turkey, next month.
Last week, Sir Keir Starmer insisted the plan would be “another step up” in the amount of money spent on arming the country, insisting that defence was the UK’s “top priority” when asked whether other government departments will need to make cuts to pay for the boost.
According to the Times, No 10 has reportedly bypassed the Treasury to tell departments directly to find 1 per cent cuts to their capital budget over the next four years, which are used to fund infrastructure and investment, in order to meet the defence commitment.
It comes after the former head of the Royal Navy warned that Britain’s armed forces are on the “brink of disaster” because of a lack of investment.
Lord West of Spithead, who led the force for four years in the early 2000s, said the government should make clear how it was going to get the money for the upcoming Defence Investment Plan.
He was among several peers who hit out at the state of the armed forces, as their former head, Lord Stirrup, warned an inadequate announcement on funding would continue decades of “hollowing out” of the services.
Meanwhile, Lib Dem peer Lord Lee of Trafford, a former defence minister, said the state of the Royal Navy is a “national embarrassment”.
It comes amid ongoing wrangling over the long-awaited defence spending plan, with the prime minister and chancellor reportedly arguing for a £15 billion package, far short of the £28 billion over the next four years which defence officials have called for.
