Gordon Brown Urges Reeves to Exclude Defense From UK Budget Rule

Former Prime Minister Gordon Brown said “exceptional” UK defense spending to counter the threat of Russia should be exempt from the government’s fiscal rules, a move that would free up billions of pounds for Chancellor of the Exchequer Rachel Reeves ahead of a difficult budget in the autumn.

Brown, who was Britain’s finance minister from 1997 to 2007 before becoming premier, said the UK’s contribution to the broader uplift in European defense spending should be funded by a joint borrowing program with other countries, instead of coming from day-to-day government spending. 

The proposal adds to a series of measures Reeves is being urged by Labour luminaries and economists to consider as she prepares to deliver her annual budget in the autumn. The chancellor’s main fiscal rule requires current expenditure to be covered by tax revenues, and this week a prominent economic think tank predicted she faces a £51 billion shortfall.

“That would create the kind of headroom that Rachel Reeves needs,” Brown told BBC Radio on Thursday, referring to his proposal. “We should be negotiating with our NATO partners to do this.”

The British government has committed to spending 5% of UK economic output on security by 2035, comprising 3.5% on core defense and 1.5% on related security spending, embracing an ambitious NATO target called for by US President Donald Trump. However, the UK hasn’t said how it would fund the plan, which goes well beyond its current target of spending 2.6% of GDP on defense from 2027.

Reeves is having to juggle spending pressures including defense with a precarious position in Britain’s wider public finances, as slow growth, higher-than-expected borrowing costs and policy U-turns in areas such as welfare have left her needing a fiscal repair job at the budget.

Economists widely predict she’ll have to increase taxes or cut spending if she wishes to hit her main fiscal rule, with mooted options including freezing income tax thresholds, closing inheritance tax loopholes and hiking taxes on pensions and banks. Another former Labour leader, Neil Kinnock, has proposed a wealth tax, while Brown is among proponents of increasing levies on the gambling sector.

Brown — whose picture adorned Reeves’ bedroom when she was a student — has argued that increasing several betting duties could raise more than £3 billion, enough to scrap the controversial two-child benefit cap. 

“There are many reasons why the highly profitable betting and gaming industry should pay a fairer share towards the cost of UK’s unmet needs,” Brown said in a separate statement on Wednesday, endorsing an Institute for Public Policy Research report calling for higher gambling taxes. “It would enable half a million children to be lifted out of poverty in this autumn’s budget.”

With assistance from Ellen Milligan.

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