Labour will have to ditch tax pledges sooner or later

Good morning. Two big policy stories going on today: the first is the government’s review into sentencing policy, which I want to digest a bit first before writing on at greater length. This is an area of policy where you can reduce long-term costs and improve outcomes. (There are also things you can do with artificial intelligence and good, old-fashioned digitisation.) But defence spending — that’s an area where there isn’t an alternative to cold, hard cash. More on that below.

Spending increases for some, austerity for others

The government will increase defence spending from 2.33 per cent of GDP to 2.5 per cent — at some point. Keir Starmer will, as it stands, reject calls from defence chiefs to increase spending to 2.65 per cent. To fund 2.5 per cent — costing an additional £5bn-£6bn a year — and also to meet the government’s fiscal rules, unprotected spending departments (not health, or education) are being asked to model cuts of between 2 to 11 per cent over the forthcoming three-year spending review period, as first reported by Bloomberg.

I’m just going to make a simple historical observation here that from 1966 to 1990, the UK spent between 4 and 5 per cent of GDP. I use those dates quite deliberately, because as a result of the 1966 defence white paper, the UK accepted that it was no longer a global power and no longer needed the defence expenditure to match. Our territorial interests haven’t changed all that much since then. What changed in 1990 of course was the end of the cold war.

The UK now faces the most dangerous and difficult situation in its own theatre since the cold war, with a US president who is far different from any of the presidents that the UK worked with from 1966 to 1990.

Now, as I said yesterday, I don’t like input targets in the main, because you can meet them by doing silly things like having two aircraft carriers when you only really need one. But it is still useful to think about inputs, and to ask ourselves whether we really think that the UK can meet its defence needs in the 2020s without increasing spending back to the level it was from 1966 to 1990.

Now, obviously, increasing defence capacity is not like going to the shops and buying some potatoes. I’m not saying that the UK should go from 2.3 per cent of GDP to 4 or 5 per cent tomorrow. But we should be clear that is the scale of the transformation required.

It is worth asking whether we really think that the British electorate would put up with that level of increase in defence spending, while at the same time being asked to tolerate a worse standard of public services than those it felt was inadequate at the time of the 2024 general election.

The constraint here is Labour’s pledges on tax: promises the party made in opposition and must keep in order to be re-elected. But at some point the government has to choose between whether it wants to meet any of the objectives it set for itself at the election or to meet the challenges that have been thrust upon it in office. The UK can’t defend Ukraine, its European allies or itself by telling Volodymyr Zelenskyy that Labour’s focus groups show that the most important pledges to 2024 Labour voters are fixing the NHS and keeping its promises on income tax.

In general, the politics tends to catch up with the policy sooner or later, and sooner or later the government is going to have to abandon its commitments on tax if it wants to meet that urgent policy need it has itself identified on defence. The only question, I think, is how prolonged and how painful its journey turns out to be.

Now try this

This week, I mostly listened to Sparks’ soundtrack to the 2021 film Annette while writing my column.

Top stories today

• ‘Obsessed with trivia’ | Conservative leader Kemi Badenoch sought to compare her party to Donald Trump’s Maga movement yesterday, arguing that a second stint in government was required to “really know how to fix” a nation’s problems.

• Doctors ‘powerless to progress their careers’ | Doctors in England are being held back from becoming specialist consultants because of a bottleneck in the training available in the NHS.

• Seeing red (tape) | Chancellor Rachel Reeves is to tell cabinet ministers to conduct a full audit of Britain’s 130 or so regulators to ensure they are working to boost growth, including looking at whether some should be scrapped.

• Hard talk | European countries clashed over sending troops to Ukraine at a crisis meeting intended to reach a consensus on how to respond to US President Donald Trump’s peace talks with Russia.

• Reform reticence | Reform UK voters are significantly more sceptical about continued British support for Ukraine than voters in the other main parties, Opinium research shared with Politico shows. A third of Farage’s supporters believe Britain should cut its contributions to the resistance against the Russian invasion, according to the survey designed by foreign policy analyst Sophia Gaston for the Australian Strategic Policy Institute think-tank. That figure stood at 19 per cent for Conservative voters and 15 per cent for Labour voters.