REEVES SIGNALS TAX RISES TO FUND DEFENCE SPENDING INCREASE

Chancellor Rachel Reeves has indicated the government may raise taxes to fund a planned increase in defence spending. Reeves ruled out additional borrowing to finance the multibillion-pound Defence Investment Plan, stating that pressures to fund defence are "only going in one direction". She made the remarks at the annual Peel Hunt FTSE 250+ Conference in London on Tuesday. "The money has to come from somewhere, and borrowing cannot always be the answer," Reeves said.

The Defence Investment Plan, known as the DIP, will set out long-term funding and strategy for the armed forces. The government has confirmed it will publish the plan before the NATO summit in Ankara, Turkey, next month. At Prime Minister's Questions, Sir Keir Starmer declined to rule out tax rises when pressed by Conservative leader Kemi Badenoch. Starmer instead pointed to what he described as the damage done to the armed forces during fourteen years of Conservative government.

The DIP represents a significant commitment to restructuring how Britain funds its military. Reeves stated that both the United States and European countries face growing pressure to increase defence expenditure and to spend existing funds more effectively. She said the government's first duty was to keep citizens safe, and framed higher taxes as preferable to the risk of rising interest rates and increased risk premiums on UK debt. The publication of the plan ahead of the Ankara summit sets a firm near-term deadline for the government to resolve outstanding questions about funding.