Fund defence spending from tax rise on middle earners, thinktank tells Healey
Summary
The Resolution Foundation thinktank says Chancellor John Healey may need to raise taxes on middle earners to pay for higher defence spending planned by the Labour government. Despite previous tax increases, taxes on average workers in the UK are still lower than in many similar countries.Key Facts
- John Healey plans to increase defence spending to 3.5% of the UK’s GDP by 2035.
- The Resolution Foundation says raising £28 billion a year for this will likely require higher taxes on middle-income earners.
- Since Labour took power in 2024, taxes have risen by £70 billion a year overall.
- The UK still taxes average workers less than most countries in the OECD and G7 groups.
- Tax increases under Healey’s predecessor caused the biggest rise in the “tax wedge” (taxes paid minus benefits received) of any OECD country last year.
- Countries with higher public spending often tax middle earners more instead of relying mostly on taxes on businesses or the wealthy.
- Labour’s current rules prevent raising income tax rates, VAT, or employee national insurance rates.
- Healey’s first budget is due on 28 October, and he needs to find about £1.4 billion a year to support defence spending plans.
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