UK Chancellor John Healey Faces Funding Challenge for Defence Spending Targets

Chancellor John Healey is set to present his first budget on 28 October. The Treasury estimates that the government will need roughly £1.4 billion a year for the next three years to fund the Labour-led Defence Investment Plan (DIP) and keep the pledge to raise defence spending to 3 % of GDP by 2030 and 3.5 % by 2035 – the NATO-mandated levels.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting

Former defence secretary John Healey resigned from the cabinet in June, arguing that the government had failed to provide sufficient resources for the DIP. After his appointment as chancellor, Healey signalled that the defence question will be “central” to the upcoming spending review, scheduled for next year.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting The GuardianThe Guardian

• The Resolution Foundation calculates that achieving the 3.5 % target would require an additional £28 billion a year in defence outlays.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting

• The UK’s “tax wedge” – taxes on earnings minus benefits – stands at 32.4 % for a single earner, below the Organisation for Economic Cooperation and Development (OECD) average for high-spending economies.

The Guardian

• A tax rise under former chancellor Rachel Reeves produced a 2.4-percentage-point increase in the tax wedge, the largest jump among OECD members that year.

The Guardian

• The DIP projects defence spending to reach 2.7 % of GDP by 2027/28, with no firm details on how the later rise to 3 % and 3.5 % will be financed.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting

Healey himself has repeatedly described defence as “central” to the forthcoming spending review, indicating that the Treasury will outline a roadmap for the 3 % and 3.5 % milestones at that time.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting

• “No other OECD rich country has a bigger state and a lower burden on average workers, so any politician promising both is not being realistic,” — James Smith

The Guardian

Healey’s budget on 28 October will set the immediate fiscal framework, after which the government will present a detailed spending-review plan next year to chart the path toward the 3 % and 3.5 % defence-spending goals.

‘No doubt’ about Healey’s commitment to defence spending, says Streeting