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24 April 2024

How will Rishi Sunak fund higher defence spending?

The Prime Minister has further shrunk the gap between the Conservatives and Labour.

By Freddie Hayward

“It’s time for us to rearm,” Rishi Sunak said yesterday at a press conference with the Polish prime minister, Donald Tusk. His call to arms – which, strangely, lacked gravitas despite its implication – came as he announced plans to boost defence spending to 2.5 per cent of GDP by 2030.

This is part of the slow realisation that Britain cannot always hide beneath America’s protective umbrella, that Europe has to invest in its defence for its own security. The US Congress did pass the huge aid package for Ukraine, Israel and Taiwan last night but only after six uncertain months of opposition and delay. On top of that, both Labour and the Conservatives view defence as a key way in which post-Brexit Britain can influence events on the continent.

Where’s the money coming from then? As a percentage of GDP, defence spending has been on a steady downwards trajectory since the mid-1980s. This “peace dividend” has been spent on the NHS, welfare spending and attempts to consolidate the public finances. No longer. The time for making hard decisions has arrived. It’s not as if Sunak announced a tranche of tax rises to pay for this. The reality is neither party will have much leeway to boost funding for Britain’s armed forces within the constraints imposed by their fiscal rules – without cutting elsewhere. And that’s precisely what the government has chosen to do. Sunak is eyeing up the civil service, still much larger than before the pandemic, for cuts. But that won’t be enough. The Institute for Fiscal Studies thinks the post-election spending cuts to unprotected departments such as prisons will have to grow to around 4 per cent.

The former defence secretary Ben Wallace has intervened, which is becoming a habit. He thinks that the defence spending boost could make National Insurance cuts in the Budget impossible. Country before party? It’s a better line than the NI one, which has twice failed to shift the polls.

At this point we should note, as is so often the case, that this announcement is not new. Boris Johnson made a similar commitment in 2022. Last week, Keir Starmer said Labour would try to get spending to 2.5 per cent “as soon as resources allow”. Which given those fiscal rules and the brutal cuts involved is essentially the same as the Tories’ plans. Sunak is meeting the German chancellor Olaf Scholz today to announce a joint plan to build artillery systems. Labour, of course, has promised a security pact with Germany for years. Yet again, a consensus has been found and the gap between the two parties has shrunk.

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