Rachel Reeves opens door to tax rises to pay for defence
The government may raise taxes to fund an increase in defense spending amid growing concerns about Britain’s troubled military, Rachel Reeves has said.
The Chancellor has ruled out borrowing more to fund the government’s multi-billion pound defense investment plan, which is expected to be published in the coming weeks; He said he would prefer to raise taxes instead and warned that pressures to fund defense “only go one way.”
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 will be honest about that and we will have to spend more on defence.
“Despite the pain of higher taxes, I think it’s better to do this than to get into a situation we’ve been in before, where interest rates have climbed and risk premiums for the UK have also climbed,” he said.
Ms Reeves added: “The government’s first duty is to keep its people safe and in the world we live in today, it is increasingly clear that the US and other European countries will have to spend more on defence, but most importantly they will spend that money better.
“Money has to come from somewhere, and borrowing isn’t always the solution.”
The government said the Defense Investment Plan (Dip), which details long-term funding and strategy for the armed forces, will be published before the NATO summit in Ankara next month.
Last week Sir Keir Starmer insisted the plan would be “another step up” in the amount of money spent arming the country and insisted defense was Britain’s “number one priority” when asked whether other government departments would have to make cuts to pay for the increase.
Accordingly TimesNo 10 reportedly bypassed the Treasury to tell ministries directly to come up with 1 per cent cuts to capital budgets over the next four years, used to fund infrastructure and investment to meet defense commitments.
It comes after the former chief of the Royal Navy warned that Britain’s armed forces were “on the brink of disaster” due to a lack of investment.
Lord West of Spithead, who led the force for four years in the early 2000s, said the government needed to make clear how it would obtain money for the upcoming Defense Investment Plan.
He was one of several colleagues to hit out at the state of the armed forces, with former head of the armed forces Lord Stirrup warning that inadequate publicity on funding would continue to create a “gap” in the services for decades.
Meanwhile, former Liberal Democrat defense minister Lord Lee of Trafford said the Royal Navy’s state of affairs was a “national embarrassment”.
This comes amid ongoing wrangling over the long-awaited defense spending plan; The prime minister and chancellor are reportedly discussing a £15bn package, well below the £28bn demanded by defense officials over the next four years.
