British finance minister Rachel Reeves has said that increasing taxes or borrowing more money would not be the best way to fund higher defence spending, as the government faces growing pressure to strengthen military budgets amid global conflicts.
Speaking during the International Monetary Fund (IMF) and World Bank spring meetings in Washington, Reeves said the government is currently reviewing several possible options to finance rising defence costs. However, she made clear that she would prefer to avoid further tax increases or additional borrowing.
She explained that the UK has already raised taxes significantly in recent budgets and that repeating such measures would be difficult. At the same time, she noted that increasing national borrowing is also not an attractive option because the government is already spending heavily on debt interest payments.
The comments come as the UK government, led by Prime Minister Keir Starmer, is preparing a long-term plan to increase defence investment. The plan aims to deliver the largest sustained rise in military spending since the Cold War era. The decision has been driven by growing security concerns following Russia’s invasion of Ukraine and the wider geopolitical instability linked to the Iran conflict.
However, the government has not yet released a detailed 10-year defence funding strategy, leaving open questions about how the additional spending will be financed.
Reeves said that one possible way to support higher defence budgets could be to reduce spending in other areas of government. This suggests that trade-offs may be required across public services if defence spending continues to rise.
In addition to discussing defence funding, Reeves also spoke about energy policy and fiscal planning. She said the government is working closely with energy companies to finalize “tie-back” projects in the North Sea. These projects would allow limited new oil and gas production by connecting to existing infrastructure rather than opening entirely new exploration sites.
The Labour Party had previously promised to stop issuing new oil and gas exploration licences as part of its broader climate and net-zero commitments. However, the tie-back approach introduced last year offers a compromise that allows some continued production while avoiding large-scale new drilling operations.
Reeves also mentioned ongoing efforts to reform the UK electricity pricing system. Currently, electricity prices in Britain are heavily influenced by gas costs, which can make energy bills more expensive for consumers and businesses. The government is considering ways to reduce this link in order to stabilize and potentially lower electricity prices.
She said further details on these energy reforms could be announced in the coming weeks.
The discussion highlights the financial challenges facing the UK government as it tries to balance multiple priorities: increasing defence spending, maintaining fiscal stability, and managing the transition to cleaner energy sources.
Economists have warned that funding higher military budgets without raising taxes or borrowing more will likely require difficult decisions on public spending. This could include cuts or slower growth in certain domestic programs.
Despite these challenges, the government has maintained that strengthening national defence is a top priority in response to evolving global security threats.
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