Posted by johnlilburne on February 18, 2025, 9:39 am
Rachel Reeves will have to raise taxes by an extra £12bn if she wants to boost defence spending to 2.5pc of GDP and avoid a fresh round of austerity.
Economists warned that meeting Sir Keir Starmer’s ambition to bolster the defence budget implied the Chancellor would have to raise taxes or cut spending by £6bn a year alone if she wanted to hit the target by the end of the decade.
Ensuring that no Whitehall department faces real-terms falls in day-to-day spending during this parliament would mean that £12bn of tax rises will be needed, according to the Resolution Foundation.
Ben Zaranko, at the Institute for Fiscal Studies (IFS), said additional tax rises were the “most likely path” for a Chancellor already likely to face pressure from unions on public sector pay rises less than a year after sanctioning a series of inflation-busting increases.
While Labour has not set out a timetable for raising defence spending to 2.5pc of the economy, military chiefs have been piling pressure on the Prime Minister to go further and faster amid demands from Donald Trump to lift spending to as much as 5pc of GDP.
It means Ms Reeves faces the prospect of breaking a promise not to “come back with more borrowing or more taxes” less than six months after her record tax raid. Alternatively, she risks angering unions by imposing deep spending cuts to unprotected Whitehall departments such as transport and housing.
While the Chancellor has suggested any savings will come from spending and welfare, the Treasury has left the door open for more tax rises in March against a backdrop of low growth and higher borrowing costs.
The Resolution Foundation said the Government’s current plans already implied cuts to unprotected departments outside health and defence of £8.4bn in 2029 to 2030. It said increasing defence spending to 2.5pc of GDP would cost around £6bn by 2029 to 2030.
History suggests two thirds of the increase will be accounted for by higher day-to-day spending within the military, the think tank said, with a third – or £2bn – driven by a rise in capital spending such as warships.
Military spending demands and the promise to protect certain government department’s budgets mean unprotected departments face finding total cuts of up to £12bn, or the equivalent of 6pc in real terms over this parliament.
Bloomberg reported that government departments are bracing for budget cuts of as much as 11pc to ensure Sir Keir can meet his pledge.
Emily Fry, of the Resolution Foundation, said: “Funding this aspiration is far from straightforward, especially as the public finances are already under strain. Absent a sunnier economic outlook, increasing defence spending by £6bn a year would likely require fresh tax rises or deeper cuts to unprotected departments like transport, housing and justice whose budgets are already stretched.”
Ms Reeves’s October Budget included plans to increase day-to-day spending by an average of 1.3pc a year over the parliament.
Mr Zaranko said that while there was no official definition of austerity, further spending cuts were likely to be painful.
He said: “If your local school is having its budget cut, if public sector workers are not getting pay rises, if councils are going bankrupt, if prisons are letting people out early because they can’t afford to expand places, that is going to feel quite a lot like austerity.”
Court judgments related to Thames Water and the previous government’s welfare reforms are also threatening to blow a hole in the public finances.
He said the Government may end up having to impose “radical” cuts to public spending in order to balance the books, such as charging for GP appointments or post-16 education including A-levels.
“I think you have to think about either things that are currently universal, that you might start means-testing. The Government never used to provide subsidised childcare for working parents. You could cut back the scope of the state as well. The government could just stop doing stuff.”
Having read the five volume's of Sumption's history of the 100 years' war, it gets a bit samey to read of another invasion plan ruined by the weather, time and tides, cheapskating and ineptitude before the English have bothered to put their trousers on.The last working-class hero in England.
Clio the cat, ? July 1997 - 1 May 2016 Kira the cat, ? ? 2010 - 3 August 2018 Jasper the Ruffian cat ? ? ? - 4 November 2021
Re: Who would bother?
Posted by Ken Waldron on February 18, 2025, 7:04 pm, in reply to "Who would bother?"
Yup. The whole "defense" thing is a rolling farce.
Wanting to invade the UK?: aside from being near impossible it would be as likely as being desperate to inherit debt.
Russia has more natural resources than any other country on the planet by a very long chalk. The UK doesn't even rate.
I can forgive small stupidities but the immense effort involved in reversing such solid fact merely to arrive at these seriously dumb conclusions has me beat.
To make sense the cuts would have to be pro-rata or the Septics would still outnumber the rest of the world. Pro-rata cuts would throw away the advantage the septics have except that it would expose how much of the money the septics spend goes on golf courses.The last working-class hero in England.
Clio the cat, ? July 1997 - 1 May 2016 Kira the cat, ? ? 2010 - 3 August 2018 Jasper the Ruffian cat ? ? ? - 4 November 2021
on February 18, 2025, 9:39 am