Sir Keir Starmer has been warned he will need to make “really quite chunky tax increases” to pay for his plans to increase defence spending.
The Prime Minister said he was “100% confident” cash would be available for all plans laid out in the new strategic defence review, which includes extra attack submarines, £15 billion on nuclear warheads and thousands of new long-range weapons.
The Government has promised to increase defence spending to 2.5% of gross domestic product (GDP) by 2027, and has an ambition – but no firm commitment – to hike it to 3% in the next parliament.
Paul Johnson, the director of the Institute for Fiscal Studies (IFS) think tank, warned the Government faces tough financial choices over the plans, as it also grapples with other key areas of public spending.
He told Times Radio: “It looks like the Government wants to reinstate the winter fuel payment. It’s thinking about the two-child limit for benefits. We’ve got a spending review next week.
“And if we are really going to spend another £10-£15 billion a year on defence, whilst inevitably we’re going to spend more and more on health and pensions and so on, you really do have to ask that question, what are the choices that you’re going to make?”
Mr Johnson added: “I mean, bluntly, it really does seem to me that the only choice that is available, if we’re going to go through all of those things, is some really quite chunky tax increases to pay for it.
“But of course, that’s not something the Prime Minister or the Chancellor is willing actually to say.”
Sir Keir earlier declined to rule out another raid on the aid budget to fund increased defence spending, and signalled he was hopeful that the extra investment could be supported by a growing national economy.
The Prime Minister was asked to say that he would not go back to the budget in search of funds to meet his 3% goal, as he set out his plans during a visit to Glasgow.
He replied: “On the aid budget, it was a difficult decision that we had to take in order to get to 2.5% and I am absolutely clear that in the meantime we have to ensure that we do other work on aid, working with other countries, other institutions, to pull levers to trigger the money that we need for aid.
“But the best way to pay for increase in any public spending is to grow our economy. And that is the focus when it comes to defence or any other spending – wealth creation.”
Mr Johnson however warned that “very poor levels of economic growth” meant the Government had “some really, really tough choices to make”.
The Prime Minister also said the terms of the strategic defence review had been set “on the premise that we will be spending 2.5% of GDP on our defence”.
He added: “Obviously, since then, what we’ve done is then put the date on that – 2027-2028 – the highest sustained increase in defence spending since the Cold War, a date I think that was earlier than some people thought it would be, but also set out that ambition to hit 3% in the next parliament.
“So I’m 100% confident that this can be delivered because that was baked in from the very start of the review as one of the first conversations we had with the reviewers.”
