Keir Starmer suggested Labour’s defence investment plan could still be ‘weeks’ away today after Rachel Reeves hinted at more tax hikes.
During bad-tempered PMQs clashes, Sir Keir seemed to pour cold water on hopes the long-awaited funding blueprint could come tomorrow.
Instead he merely committed to releasing the proposals – which have been the subject of months of Whitehall wrangling – before the Nato summit on July 7.
The premier also dodged as Kemi Badenoch demanded benefits curbs to help fund the military, condemning signals from the Chancellor that taxes will need to go up again.
The Treasury has been playing hardball over how much money can be allocated to defence, and where it will come from.
As well as a multi-billion pound shortfall in existing budgets, there are disagreements over how and when targets for increasing spending can be reached.
The Government’s room for manoeuvre is limited after a revolt last year torpedoed efforts to curb spiralling sickness benefits.
It emerged last week that Work and Pensions Secretary Pat McFadden privately complained that Labour MPs only cared about who they can ‘tax in order to pay benefits to others’.
During bad-tempered PMQs clashes, Keir Starmer seemed to pour cold water on hopes the long-awaited funding blueprint could come tomorrow
Rachel Reeves has hinted Brits will face even more taxes to fund a boost to defence spending
Departments are thought to have been asked to stump up an average of 1 per cent of their capital budgets to help raise £6billion towards the cost of the defence investment plan (DIP).
The raid could hit school and hospital programmes as well as delaying transport infrastructure projects.
But Ms Reeves has been making clear that savings elsewhere are unlikely to be enough.
Speaking at a conference in the City yesterday, the Chancellor said her Budget ‘headroom’ would not cover all the extra spending.
She added: ‘The first duty of government is to keep its people safe.
‘In the world in which we live today it’s increasingly clear that us and other European countries are going to have to spend more on defence but crucially spend that money better.
‘That should have a boost for our defence industry.
‘But the money has to come from somewhere and borrowing cannot always be the answer.’
She said ‘getting a grip’ on public finances had meant interest rates have been able to come down.
Ms Reeves added: ‘It is bearing results but I would argue that despite the pain of higher taxes, better to do that than to get into a situation that we were in before that we had interest rates climbing and the risk premium for the UK climbing too.’
The announcement is expected to be accompanied by an increase in defence spending of around £15billion, bargained down from an initial £18billion by the Treasury.
But the timetable for the DIP looks to be slipping again. If the DIP does not appear tomorrow it is unclear whether publication can happen next week, as the PM has engagements outside of the UK.
And Speaker Lindsay Hoyle warned that unveiling the plan on Friday, when MPs are not sitting, would be a ‘kick in the face’.
After the Speaker’s intervention, Defence Secretary John Healey later effectively ruled out publishing the DIP on Friday, saying: ‘When we publish really significant reports from defence, like the defence investment plan, we respect Parliament.’
In the Commons this lunchtime, Mrs Badenoch insisted: ‘The world is getting more dangerous and the British public want to know this Government is doing everything it can to protect our national security.
‘So, can the Prime Minister tell the House, will the full DIP finally be published this week?’
Sir Keir replied: ‘So far as defence is concerned, we have already taken a number of measures – we’ve increased defence spending from 2.3 per cent to 2.6 per cent in 2027. That’s spending £270billion over this Parliament.
‘We’ve carried out a strategic review of defence and we’re committed to publishing the Dip plan before the Nato summit, which is in just a few weeks’ time.’
Mrs Badenoch shot back: ‘That sounded like a ”no”.’
Ms Reeves has already pushed the tax burden towards a never-before seen peak, but there are concerns that a Labour lurch to the Left could spark another spending splurge and drive up borrowing costs.
There are signs of a developing ‘bidding war’ between rivals hoping to wrestle the keys to Downing Street from Sir Keir.
Contenders have been talking up the prospect of ‘wealth’ taxes, while Andy Burnham has mooted a ‘land value’ tax and revaluing council tax.
In under two years the Chancellor has imposed measures raising an extra £75billion annually.
The staggering tally makes her the biggest tax-raising Chancellor in the last six decades, far ahead of her nearest competitor for the dubious distinction.
There are signs of a developing ‘bidding war’ between rivals hoping to wrestle the keys to Downing Street from Keir Starmer
That was fellow Labour politician Gordon Brown, whose fiscal statements added up to an extra £62.1billion.
The Treasury’s OBR watchdog forecast in March that the tax burden will reach a never-before seen mark of 38.5 per cent of GDP in 2030-31.
That was even higher than the 38.3 per cent envisaged before.
The watchdog has raised concerns the Government is relying on a small base of better-off taxpayers for the bulk of revenues, while the ‘stealth raid’ of freezing earnings thresholds is very sensitive to changes in inflation and earnings.
Touring broadcast studios for the Government this morning, Labour Party chair Anna Turley did not deny taxes will have to rise again.
‘The defence review and spending plan is going to be published imminently in the next few days, I understand,’ she told GB News.
‘So we’ll see there our commitment that we have agreed to raise defence spending to meet our NATO commitments, and that is going to happen.
‘Those discussions are taking place, of course, how that’s to be paid for.
‘We are in a situation where the world is extremely insecure. It’s the most volatile that it’s been for decades, and it’s absolutely vital that we get this right. We have put more money into defence spending since the Cold War under this government.
‘We’ve taken it extremely seriously. We’ve got to make sure that we look at every means possible to protect the country, to keep our citizens safe, and the Defence Spending Review will set that out shortly.’
Pressed whether welfare spending should be cut to avoid tax rises, Ms Turley said: ‘We’ve been very clear that we are making sure we’re determined to get, particularly young people, back into work and reduce the numbers of people who are unemployed.
‘But actually, when you look at the welfare bill in its entirety, a huge amount of that is going on things like public pensions, on housing.
‘Of course, we need to look at every aspect of government spending, but there are very difficult decisions to be made across the board in every department, and I know the Chancellor is having those conversations right now with colleagues around the table.’
