Will Nato push the UK Prime Minister Keir Starmer to spend more on defence? | BBC Newscast

Key Concepts

Spending Review, Strategic Defence Review, Capital Spending, Revenue Spending, GDP percentages (2%, 2.5%, 3%, 5%), Zero-Based Review, Fiscal Rules, Reform UK, Liz Truss's mini-budget, Public Finances, Industrial Strategy, Infrastructure Strategy, Trade Strategy, NATO Summit, Military Mobility, Two-Child Benefit Cap, Universal Credit, Green Growth, Economic Growth, National Insurance, Bond Yields, Market Confidence.

Strategic Defence Review and Defence Spending

The UK government launched its Strategic Defence Review, sparking immediate debate about funding. The review's authors advocated for increasing defence spending to 3% of national income, exceeding the government's commitment of 2.5% by 2027. The Prime Minister avoided committing to 3%, citing uncertainty about future funding sources, framing it as "fantasy politics" to promise without knowing how to pay. This decision will likely be made after the next general election, potentially at the upcoming NATO summit in The Hague.

• Key Point: The debate revolves around the percentage of GDP allocated to defence, with figures like 3% and even 5% being discussed.
• Example: Germany is aiming for 3.5% of GDP on defence, potentially reaching 5% when including infrastructure improvements relevant to military mobility (e.g., reinforcing bridges for tanks).
• Argument: Framing defence spending as an economic and industrial opportunity, emphasizing job creation and exports, is crucial for public support.
• Data: Increasing defence spending to 3% or 3.5% of GDP would require tens of billions of pounds in extra funding.
• Technical Term: Military Mobility refers to infrastructure improvements that facilitate the movement of military equipment, a significant consideration within the EU.

Government Spending and the Spending Review

The government is pre-announcing positive spending measures ahead of the Spending Review, which is expected to be challenging. The focus is on capital spending (long-term investments like infrastructure) while revenue spending (day-to-day expenses) remains tight. The Chancellor has adjusted borrowing rules to allow for more capital spending.

• Key Point: The government is prioritizing capital spending, particularly in areas like defence and local public transport.
• Example: Extending free school meals to all families on Universal Credit is a pre-announced spending measure costing approximately £1 billion.
• Methodology: The government claims to be using a "zero-based review" process, scrutinizing every line item of spending.
• Argument: The government is trying to illustrate that there are other ways to help children out of poverty than lifting the two-child benefit cap.
• Quote: Rachel Reeves stated she wouldn't be able to do everything she could.
• Technical Term: Capital Spending refers to long-term investments in infrastructure and equipment. Revenue Spending covers day-to-day operational expenses.

Economic Context and Fiscal Policy

The discussion highlights the tension between increased spending commitments and the need for fiscal responsibility. The potential for the UK economy to perform better than expected is raised, which could alter the political landscape. The legacy of Liz Truss's mini-budget continues to influence fiscal policy, with the Treasury wary of market reactions.

• Key Point: The government's fiscal decisions are heavily influenced by the need to maintain market confidence and avoid repeating the turmoil caused by the Truss mini-budget.
• Argument: Mel Stride is distancing himself from Liz Truss because they feel they have to distance themselves from Liz Truss.
• Data: Increasing defence spending from 2.3% to 5% of GDP would require an additional £80-90 billion per year.
• Technical Term: Fiscal Rules are guidelines and targets set by the government to manage public finances.

Reform UK and Political Dynamics

The resignation of Zia Ysef as chairman of Reform UK is considered significant due to his role in professionalizing the party. This event allows other parties to highlight perceived instability within Reform UK. The Conservatives and Labour are both strategically positioning themselves in relation to Reform UK's rise in the polls.

• Key Point: Zia Ysef's departure is a setback for Reform UK's efforts to build a strong organizational base.
• Example: Jeremy Hunt commented on Zia Ysef's departure, highlighting the pattern of key figures leaving Nigel Farage's parties.
• Argument: Conservatives wish that Labour were doing better because they conclude if Labour's opinion poll ratings since the election hadn't cratered then reforms would not have gone up by as much.

Conclusion

The podcast episode provides a detailed overview of the UK government's spending plans, the debates surrounding defence funding, and the broader economic and political context. The upcoming Spending Review is positioned as a crucial moment for understanding the government's priorities and the trade-offs it is willing to make. The episode also touches on the dynamics within Reform UK and the ongoing impact of Liz Truss's economic policies. The key takeaway is that the government faces significant challenges in balancing spending commitments with fiscal responsibility, while navigating a complex political landscape.