Starmer shifts spending priorities ahead of Washington visit

The United Kingdom is facing its toughest fiscal test in decades. The country’s debt-to-GDP ratio now nears 100 per cent, up from 45 per cent before the 2008 financial crisis. Bond markets are showing signs of strain, and the foreign exchange reserves are dwindling. How is the government tackling this slump? By boosting defence spending!

While this may seem out of place on the surface, this boost is expected to help Starmer when he visits US President Donald Trump on February 27. Starmer, along with other European leaders, is trying to manage what we call the ‘Trump effect.’ The UK is no exception to Trump’s tariff onslaught, as it looks to tackle external challenges along with domestic stagnation. While Trump recently advocated for reduced global military spending, the President has been pressuring NATO allies to increase defence spending to 5 per cent of GDP.

UK hikes defence spending to highest since Cold War

The UK’s defence spending is set to rise to 2.5 per cent of GDP by 2027. The government has also outlined the long-term goal of increasing it to 3 per cent in the next parliament. This move marks the highest military budget increase since the Cold War. While Starmer believes this boosts the country’s defences in the aftermath of the Ukraine war, the broader goal seems to align with Trump’s strategies.

However, the defence hike for the UK is tougher, considering the economic challenges gripping the country. Consumers and businesses already oppose the recent tax hike introduced in the budget, with few options for the government to boost their vaults. The question remains…where will the extra money come from?

According to Starmer, it will come by making tough choices. In this case, it means cutting the overseas development aid and diverting that money to the military. ‘In the short term, it can only be funded through hard choices, and in this case, that means we will cut our spending on development assistance, moving from 0.5 per cent of GNI today to 0.3 per cent in 2027, fully funding our increased investment in defence. I want to be clear to the house that is not an announcement I am happy to make,’ he said.

How will this move impact the talks between Starmer and Trump? Can the UK become the leader of Europe’s collective defence? We will have to wait for the meeting to conclude.