Sir Keir Starmer will urge European countries to commit more in defence spending as he heads to Brussels for security talks.
The prime minister will call on Europe to “step up and shoulder more of the burden” to fend off the threat posed by Vladimir Putin’s Russia.
Sir Keir, the first prime minister to meet all the leaders of the 27 EU nations in Brussels since Brexit, will argue the bloc needs to capitalise on the weak state of the Russian economy by continuing with its sanctions regime.
The prime minister will meet NATO Secretary General Mark Rutte on Monday afternoon before travelling to meet with the leaders of the 27 EU member states at an informal meeting of the European Council.
Image: Sir Keir Starmer with Olaf Scholz, the German chancellor, whom he hosted at Chequers on Sunday. Pic: PA
Sir Keir is expected to say: “We need to see all allies stepping up – particularly in Europe.
“President Trump has threatened more sanctions on Russia and it’s clear that’s got Putin rattled. We know that he’s worried about the state of the Russian economy.
“I’m here to work with our European partners on keeping up the pressure, targeting the energy revenues and the companies supplying his missile factories to crush Putin’s war machine.
“Because ultimately, alongside our military support, that is what will bring peace closer.”
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The UK says it currently spends around 2.3% of GDP [gross domestic product] on defence.
Image: Ukrainian President Volodymyr Zelenskyy, Prime Minister Keir Starmer and NATO Secretary General Mark Rutte at 10 Downing Street in October. Pic: Reuters
Last year EU member states spent an average of 1.9% of EU GDP on defence, according to the European Defence Agency, a 30% increase compared with 2021.
Earlier this week European Council President Antonio Costa said the 23 EU members who belong to NATO are likely to agree to raise the defence spending target above the current 2% of national output at the next NATO summit in June.
However, Donald Trump has repeatedly criticised NATO – the military alliance consisting of 30 European countries and the US and Canada – arguing that his country is contributing too much to the alliance’s budget while Europeans contribute too little.
During the US election campaign, President Trump said America would only help defend NATO members from a future attack by Russia if they met their spending obligations.
The session of the Informal European Council comes as the government seeks to reset its relationship with the EU and boost areas of cooperation, including on defence and tackling illegal migration.
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1:03
Starmer hosts German chancellor
On Sunday the prime minister hosted German Chancellor Olaf Scholz at his country residence Chequers, where the two leaders agreed on the “importance of scaling up and coordinating defence production across Europe”, Downing Street said.
However, the government has repeatedly said that a closer relationship with the EU will only be sought within its red lines – meaning there will be no return to freedom of movement and rejoining the customs union or single market.
The UK has floated a new tax framework that eases the burden on decentralized finance (DeFi) users, with deferred capital gains taxes on crypto lending and liquidity pool users until the underlying token is sold, which the local industry has welcomed.
HM Revenue and Customs (HMRC) proposed on Wednesday a “no gain, no loss” approach to DeFi that would cover lending out a token and receiving the same type back, borrowing arrangements and moving tokens into a liquidity pool.
Taxable gains or losses would be calculated when liquidity tokens are redeemed, based on the number of tokens a user receives back compared to the number they originally contributed, according to the proposal.
Currently, when a user deposits funds into a protocol, regardless of the reason, the move may be subject to capital gains tax. In the UK, capital gains tax rates can vary between 18% and 32%, depending on the action.
Tax framework a ‘positive signal’ for UK crypto regulation
Sian Morton, marketing lead at the crosschain payments system Relay protocol, said HMRC’s no gain, no loss approach is a “meaningful step forward for UK DeFi users who borrow stablecoins against their crypto collateral, and moves tax treatment closer to the actual economic reality of these interactions.”
“A positive signal for the UK’s evolving stance on crypto regulation,” she added.
Maria Riivari, a lawyer at the DeFi platform Aave, said the change “would bring clarity that DeFi transactions do not trigger tax until you truly sell your tokens.”
“Other countries facing similar questions may want to take note of HMRC’s approach and the depth of research and consideration behind it,” she added.
However, the proposal is not a done deal yet. HMRC said it’s continuing to engage with relevant stakeholders “to assess the merits of this potential approach, and the case for making legislative change to the rules governing the taxation of crypto asset loans and liquidity pools.”
“In particular, to ensure that it would cover the range of transactions that can take place under these arrangements and would be viable for individuals to comply with,” the agency added.
In the initial consultation, 32 formal written responses were submitted by individuals, businesses, tax professionals and representative bodies, which included crypto exchange Binance, venture capital firm a16z Capital Management and self-regulatory trade association Crypto UK.
Rachel Reeves needs to “make the case” to voters that extending the freeze on personal income thresholds was the “fairest” way to increase taxes, Baroness Harriet Harman has said.
Speaking to Sky News political editor Beth Rigby on the Electoral Dysfunction podcast, the Labour peer said the chancellor needed to explain that her decision would “protect people’s cost of living if they’re on low incomes”.
In her budget on Wednesday, Ms Reeves extended the freeze on income tax thresholds – introduced by the Conservatives in 2021 and due to expire in 2028 – by three years.
The move – described by critics as a “stealth tax” – is estimated to raise £8bn for the exchequer in 2029-2030 by dragging some 1.7 million people into a higher tax band as their pay goes up.
Image: Rachel Reeves, pictured the day after delivering the budget. Pic: PA
The chancellor previously said she would not freeze thresholds as it would “hurt working people” – prompting accusations she has broken the trust of voters.
During the general election campaign, Labour promised not to increase VAT, national insurance or income tax rates.
He has also launched a staunch defence of the government’s decision to scrap the two-child benefit cap, with its estimated cost of around £3bn by the end of this parliament.
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4:30
Prime minister defends budget
‘A moral failure’
The prime minister condemned the Conservative policy as a “failed social experiment” and said those who defend it stand for “a moral failure and an economic disaster”.
“The record highs of child poverty in this country aren’t just numbers on a spreadsheet – they mean millions of children are going to bed hungry, falling behind at school, and growing up believing that a better future is out of reach despite their parents doing everything right,” he said.
The two-child limit restricts child tax credit and universal credit to the first two children in most households.
The government believes lifting the limit will pull 450,000 children out of poverty, which it argues will ultimately help reduce costs by preventing knock-on issues like dependency on welfare – and help people find jobs.
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8:46
Budget winners and losers
Speaking to Rigby, Baroness Harman said Ms Reeves now needed to convince “the woman on the doorstep” of why she’s raised taxes in the way that she has.
“I think Rachel really answered it very, very clearly when she said, ‘well, actually, we haven’t broken the manifesto because the manifesto was about rates’.
“And you remember there was a big kerfuffle before the budget about whether they would increase the rate of income tax or the rate of national insurance, and they backed off that because that would have been a breach of the manifesto.
“But she has had to increase the tax take, and she’s done it by increasing by freezing the thresholds, which she says she didn’t want to do. But she’s tried to do it with the fairest possible way, with counterbalancing support for people on low incomes.”
She added: “And that is the argument that’s now got to be had with the public. The Labour members of parliament are happy about it. The markets essentially are happy about it. But she needs to make the case, and everybody in the government is going to need to make the case about it.
“This was a difficult thing to do, but it’s been done in the fairest possible way, and it’s for the good, because it will protect people’s cost of living if they’re on low incomes.”
With all the speculation, it was always going to be a big one, but Rachel Reeves’s second budget turned into a political earthquake before she even stood up at the despatch box.
In this bumper budget special, Beth, Ruth, and Harriet unpick what happened on one of the most dramatic days in the fiscal calendar.
With the unprecedented leak of the Office for Budget Responsibility’s assessment giving the opposition a sneak preview, Kemi Badenoch delivered a fiery attack. Listeners weigh in on their thoughts of her comebacks.
Send us your messages and Christmas-themed questions on WhatsApp at 07934 200 444 or email electoraldysfunction@sky.uk.
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