Starmer's options in funding a further defence spending rise would be limited

"Keir Starmer has few options if he wants to increase annual defence spending by up to 14bn before the end of this parliament. In last summer's spending review, the government set out plans to increase defence spending from 2.3% of national income, or gross domestic product (GDP), in 2024-25 about 66bn, to 2.6% in 2028-29. But now there are hints that the embattled prime minister wants to go much faster."

"We must build our hard power because that is the currency of our age, he said. We must spend more, deliver more and coordinate more. The BBC said No 10 was considering an increase to 3% of GDP by the end of this parliament in 2029 to meet Starmer's ambition, although it is unclear if this will turn into a concrete plan given the many obstacles."

"Reeves hopes that strong economic growth will bail her out. A calmer global economy, with Donald Trump distracted by more domestic concerns, could mean most western governments also enjoy lower inflation than expected and reduced borrowing costs. A recent assessment by Bloomberg of gilt yields the interest rate paid by the Treasury on government debt shows they have fallen since last November, saving about 1.5bn a year."

Keir Starmer is pushing for faster and larger increases in UK defence spending to counter the perceived threat from Russia. Planned rises from 2.3% of GDP in 2024-25 to 2.6% in 2028-29 may be accelerated, with consideration of a 3% target by 2029. Political obstacles include backbench pressure for spending on health and social care and stringent Treasury borrowing limits aimed at reducing a persistent 5% of GDP deficit. The chancellor has pencilled in tight limits through 2029 and hopes stronger economic growth and lower borrowing costs will ease fiscal pressures.

Read at www.theguardian.com