Chancellor Rachel Reeves has warned that spending cuts will be necessary to meet Labour’s commitment to boost defence spending to 2.5 per cent of gross domestic product (GDP) as Europe is plunged a new crisis.
The Chancellor made clear on Thursday that “difficult choices” would be required across Government departments to fund the increase from the current 2.3 per cent level as US President Donald Trump appears to be abandoning Ukraine in the face of Russia’s illegal invasion.
“Recognising the priority of defence spending in the world that we live in today means that we will have to make difficult choices so that we can spend that money that is needed to keep our country safe,” the Chancellor said.
Reeves emphasised her firm stance on the defence spending target: “I am absolutely committed to spending 2.5 per cent of GDP on defence. I am really clear that a strong economy depends on strong defences and our national security being protected.”
She added: “We will set out that pathway to 2.5 per cent of GDP. We’ll do it in a proper way, but no one should be in any doubt about my commitment.”
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Spending cuts are on the cards, according to reports
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The defence spending pledge comes as Prime Minister Starmer prepares for a Washington visit next week, aiming to demonstrate Britain’s commitment to military spending to Donald Trump.
Trump has recently sparked controversy by calling Ukrainian President Volodymyr Zelensky a “dictator” and accusing Kyiv of initiating the conflict with Russia.
These comments have heightened pressure on European nations to prove they can defend Ukraine and themselves against Russian aggression, with Vice President JD Vance calling on EU countries to spend more money on defence.
However, Chancellor faces significant fiscal challenges, with her commitment to strict fiscal rules requiring debt reduction and no borrowing for day-to-day spending.
The Resolution Foundation think tank has warned that an additional £12billion in tax rises would be needed to achieve the 2.5 per cent defence target by 2030. Government departments have reportedly been asked to model cuts of up to 11 per cent, according to Bloomberg.
Speaking to ITV, Reeves said: “The fiscal rules are incredibly important. They’ve returned stability to our country after the instability that we’ve seen. And instability – the people that pay the price for that are ordinary working people.”
It is understood that the Treasury is particularly focused on finding savings in the welfare budget despite initially resisting rapid moves towards the 2.5 per cent defence spending target, which was a key Labour manifesto promise.
Prime Minister Keir Starmer has yet to specify a precise timeline for reaching the increased spending level with detailed roadmap for achieving the defence spending target expected to be unveiled this spring.
Earlier this month, figures from the Office for National Statistics (ONS) found that Britain notched up a record Government borrowing surplus in a boon for the Chancellor.
This is largely due to self-assessed tax returns with the public sector net borrowing surplus sitting £15.4billion last month; more than the surplus seen a year ago and is the largest since monthly records began in 1993.
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Figures from the ONS has
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Jessica Barnaby, the ONS’ deputy director for public sector finances, said: “While the public finances are often in surplus in January, this year saw the biggest monthly surplus on record, with high January self-assessment receipts bolstering income.
“However, over the financial year to date as a whole, borrowing was still up on last year and was the fourth-highest on record for the year to date.”
In response to the figures, Darren Jones, the chief secretary to the Treasury, said the Government is “committed to delivering economic stability and meeting our non-negotiable fiscal rules”.
