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Fund defence spending from tax rise on middle earners, thinktank tells Healey

From The Guardian · () English

Summarized by DistantNews. Read the original for the full story.

At a glance

Analysis Named sources New plan
  • The Resolution Foundation says the UK would need to raise taxes on middle earners to fund a planned increase in defence spending.
  • The thinktank estimates that meeting Labour’s pledge to spend 3.5% of GDP on defence by 2035 would cost £28 billion a year.
  • It says the UK’s tax burden on average earners remains below OECD and G7 averages despite recent tax increases.

John Healey will need to consider higher taxes for middle earners if he wants to finance a major increase in Britain’s defence budget, the Resolution Foundation says.

The thinktank estimates that Labour’s pledge to devote 3.5% of GDP to defence by 2035 would require an additional £28 billion a year. Healey, now in No 11 Downing Street, has said he will wait for next year’s spending review before setting out how the government will meet the commitment.

The issue has already shaped Healey’s political career. He resigned from Keir Starmer’s government in June, saying the then prime minister had not adequately funded defence. In its report, Thin End of the Wedge, the Resolution Foundation argues that average workers must contribute more if the government wants to expand public spending rather than rely mainly on business or wealth taxes.

Despite recent increases, the UK still taxes average earners less than most of our international peers.

— James SmithThe Resolution Foundation’s chief economist argued that average earners could bear higher taxes to help fund greater public spending.

The foundation says Labour has already raised taxes by about £70 billion a year since taking power in 2024. Rachel Reeves’s budgets produced a 2.4 percentage point increase in the tax wedge last year, the largest rise among OECD countries. Even so, the tax wedge for a single average earner stands at 32.4%, below the OECD and G7 averages and below its level before the 2008 global financial crisis.

James Smith, the foundation’s chief economist, said, “Despite recent increases, the UK still taxes average earners less than most of our international peers.” He added, “No other OECD rich country has a bigger state and a lower burden on average workers, so any politician promising both is not being realistic.” The government also faces pressure to help households with winter energy bills and support unemployed young people, while maintaining its promise not to raise income tax, VAT or employee national insurance rates.

No other OECD rich country has a bigger state and a lower burden on average workers, so any politician promising both is not being realistic.

— James SmithSmith said the government could not substantially expand the state while keeping taxes on average workers comparatively low.
About this summary

Originally published by The Guardian. Summarized and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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