Starmer dodges questions on defence spending funding

Key facts

• Sir Keir Starmer dodged questions regarding the funding for increased defence spending.
• The publication of a 10-year defence spending blueprint is delayed, with a commitment to release it before the July 7 NATO summit.
• Starmer did not rule out tax increases as a funding mechanism for defence, aligning with Chancellor Rachel Reeves' preference for higher taxes over increased debt.
• The UK's defence spending target is to increase from 2.6% of GDP to 3.5%.
• Speculation includes potential cuts to departmental infrastructure budgets and the possibility of a shorter procurement-focused plan being released soon.

Sir Keir Starmer has evaded direct questions about how increased defence spending will be funded, suggesting that a comprehensive 10-year plan will not be published until closer to the NATO summit on July 7. During Prime Minister's Questions, Starmer declined to rule out tax rises, a position echoed by Chancellor Rachel Reeves who has stated a preference for higher taxes over increased national debt to finance defence.

The government's Defence Investment Plan (DIP) has faced delays for over six months, with ongoing debate surrounding the funding required to raise defence spending from its current 2.6% of GDP to a target of 3.5%. Kemi Badenoch, the Conservative leader, criticized the government's "total paralysis" and suggested that "bond markets are watching" the situation.

Media reports indicate potential cuts to departmental infrastructure budgets, including the NHS and energy sectors, as well as discussions about when the 3% GDP defence spending target will be met, with some suggesting it will be after 2029. A shorter version of the DIP, focusing on procurement and technology, may be released by the end of the week.

Speculation about funding methods, including spending cuts, tax increases, and borrowing, has unsettled City analysts and economists. Manchester mayor Andy Burnham had initially suggested defence spending could be exempt from fiscal rules, similar to Germany, though he later retracted the comments. The Liberal Democrats proposed increased borrowing through a dedicated bond, while the Conservatives suggested reversing the two-child benefit cap, valued at approximately £3 billion, to fund defence.