- Economists have warned the UK government faces a stark choice between tax hikes or deep cuts to public services to fund a required boost in defence spending.
- The Institute for Fiscal Studies (IFS) estimates that meeting Nato’s 3.5 per cent of national income defence target would cost an additional £35 billion annually.
- This significant sum, which is equivalent to the combined budgets of the Ministry of Justice and the Home Office, could necessitate a 3 to 3.5 percentage point rise in the main rate of VAT.
- IFS director Helen Miller stated that a meaningful increase in defence spending is not feasible without substantial cuts to other government programmes or higher taxes.
- Miller also highlighted that escalating events in the Middle East, causing sharp rises in gas prices and borrowing costs, represent a major economic concern, potentially leading to lower growth and higher inflation if prolonged.
IN FULL
