Donald Trump demands that the European allies spend more in defense and that the Prime Minister nods.
During a summit in Paris, Sir Keir Starmer urges his counterparts to take the new president seriously and to make commitments of concrete spending before the NATO Summit in June.
Starmer plays a leading role at the summit, but some could (rightly) emphasize that Great Britain itself has itself when it comes to separating real money.
The workforce has already been committed to Increase defense expenses From 2.3% to 2.5% of GDP, but, for the moment, there is no date for the time the target is reached – not surprisingly, the treasure wants to push it as much as possible.
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The challenge is clear: an increase in defense spending means that sacrifices will have to be made elsewhere, and promises may have to be broken.
Ministers must weigh geopolitical and diplomatic risks against their national program.
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This government has promised to adequately finance public services, but it is also determined to keep a lid on loans, imposing a budgetary rule which requires that tax receipts cover daily expenses.
He manages for the moment. Trade taxes have been increased to support public services – at a considerable political cost for the Chancellor.
Small place for maneuver
However, she will have to find even more money if she wants to avoid real cuts in the courts, prisons and local authorities after this year.
Rachel Reeves Promised that it will no longer resume companies, but the government has also promised that it will not increase VAT, income tax or national insurance, which means that it has little room for The maneuver.
It could eat in the height of the height against its budgetary objective – 9.9 billion pounds sterling – but this should already decrease considerably when the Budget Liability Office (OBR) publishes updated economic forecasts as well as the budget Next month.
The watchdog is likely to demarcate the country’s growth prospects, which means that tax revenue forecasts will also shrink.
Peak: pa
The Treasury is already considering ministerial budget cuts to achieve the objective, an unpopular decision which takes place against the government’s political ambitions. So how all this square with plans to increase defense expenses by 2.3% to 2.5% of GDP?
This decision would amount to an additional 5 billion pounds to 6 billion pounds in cash, bringing total defense expenses to around 66 billion pounds sterling per year. This may not seem to be a huge sum, but it is important in the context of tight public finances and could easily eat most of the Chancellor’s height.
It might not even be enough
Even 2.5% will not silence criticism.
Military leaders have warned that additional sums will not be sufficient to achieve the current objectives and would force the military to slow down their ambitions. Going to 3% of GDP would mean spending 20 billion pounds more in defense.
If the country was to appease the American president and go up to 5% of GDP, it would mean spending about 80 billion pounds more.
It is twice as much as historically important tax increases in the fall budget, which amounted to around 40 billion pounds sterling. In the current framework, it seems improbable.
So could the framework change?
Great Britain is in the same budgetary link as Europe, but the block has agreed to temporarily facilitate its tax rules to allow countries to spend more in defense.
EU budgetary rules oblige countries to maintain debt / GDP ratios less than 60% and annual deficits at 3% or less. However, Ursula von der Leyen announced the change at the Munich security conference on Friday
“This will allow member states to considerably increase their defense expenses,” she said.
A difficult decision
This is not a decision that Great Britain could take lightly.
Modification of tax rules Less than a year after defining them could damage credibility in the financial markets.
The government is already increasing loans to finance the investment, which it has marked as an exception of expenses necessary to stimulate economic growth. If it starts to create more exceptions, it could create attacks among investors.
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Ben Zaranko Associate Director at the Institute for Tax Studies, said: “If defense expenses must increase considerably, it is difficult to overestimate the gravity of the budgetary challenge that this would pose to the government.
“Responding to pressures of an aging population on the NHS while simultaneously increasing defense spending, at a time of stagnant growth and high interest rate, would be a vintage challenge – and certainly not the one that could be met While sticking to the work letter of the promised work of manifesto.