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The UK will be forced to agree this month to increase defence spending to 3.5% of national income within a decade as part of a NATO push to rearm and keep the US on side, Sky News understands.

The certainty of a major policy shift means there is bemusement in the Ministry of Defence (MoD) about why Sir Keir Starmer‘s government has tied itself in knots over whether to describe an earlier plan to hit 3% of GDP by the 2030s as an ambition or a commitment, when it is about to change.

The problem is seen as political, with the prime minister needing to balance warfare against welfare – more money for bombs and bullets or for winter fuel payments and childcare.

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Prime Minister Sir Keir Starmer stands next to a New Zealand soldier during a visit to a military base during a visit to a military base training Ukrainian troops in the West of England. Picture date: Tuesday April 22, 2025. PA Photo. See PA story POLITICS Ukraine. Photo credit should read: Finnbarr Webster/PA Wire
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Prime Minister Sir Keir Starmer during a visit to a military base training Ukrainian troops in April. File pic: PA

Sir Keir is due to hold a discussion to decide on the defence spending target as early as today, it is understood.

As well as a rise in pure defence spending to 3.5% by 2035, he will also likely be forced to commit a further 1.5% of GDP to defence-related areas such as spy agencies and infrastructure. Militaries need roads, railway networks, and airports to deploy at speed.

This would bolster total broader defence spending to 5% – a target Mark Rutte, the head of NATO, wants all allies to sign up to at a major summit in the Netherlands later this month.

It is being referred to as the “Hague investment plan”.

Asked what would happen at the summit, a defence source said: “3.5% without a doubt.”

Yet the prime minister reiterated the 3% ambition when he published a major defence review on Monday that placed “NATO first” at the heart of UK defence policy.

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What’s in the UK Strategic Defence Review?

The defence source said: “How can you have a defence review that says NATO first” and then be among the last of the alliance’s 32 member states – along with countries like Spain – to back this new goal?

Unlike Madrid, London presents itself as the leading European nation in the alliance.

A British commander is always the deputy supreme allied commander in Europe – the second most senior operational military officer – under an American commander, while the UK’s nuclear weapons are committed to defending the whole of NATO.

Even Germany, which has a track record of weak defence spending despite boasting the largest economy, has recently signalled it plans to move investment towards the 5% level, while Canada, also previously feeble, is making similar noises.

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Is the UK battle ready?

The source signalled it was inconceivable the UK would not follow suit and said officials across Whitehall understand the spending target will rise to 3.5%.

The source said it would be met by 2035, so three years later than the timeline Mr Rutte has proposed.

Defence spending is currently at 2.3%.

A second defence source said the UK has to commit to this spending target, “or else we can no longer call ourselves a leader within NATO”.

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Sky News’s political editor Beth Rigby challenged the prime minister on the discrepancy between his spending ambitions and those of his allies at a press conference on Monday.

Sir Keir seemed to hint change might be coming.

“Of course, there are discussions about what the contribution should be going into the NATO conference in two or three weeks’ time,” he said.

“But that conference is much more about what sort of NATO will be capable of being as effective in the future as it’s been in the last 80 years. It is a vital conversation that we do need to have, and we are right at the heart of that.”

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Mr Rutte, a former Dutch prime minister, said last week he assumes alliance members will agree to a broad defence spending target of 5% of gross domestic product during the summit in The Hague on 24 and 25 June.

NATO can only act if all member states agree.

“Let’s say that this 5%, but I will not say what is the individual breakup, but it will be considerably north of 3% when it comes to the hard spend [on defence], and it will be also a target on defence-related spending,” the secretary general said.

The call for more funding comes at a time when allies are warning of growing threats from Russia, Iran, and North Korea as well as challenges posed by China.

But it also comes as European member states need to make NATO membership seem like a good deal for Donald Trump.

The leaders of all allies will meet in The Hague for the two-day summit.

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The US president has repeatedly criticised other member states for failing to meet a current target of spending 2% of national income on defence and has warned the United States would not come to the aid of any nation that is falling short.

Since returning to the White House, he has called for European countries to allocate 5% of their GDP to defence. This is more than the 3.4% of GDP currently spent by the US.

Mr Rutte is being credited with squaring away a new deal with Mr Trump in a meeting that would see allies increase their defence spending in line with the US president’s wishes.

The NATO chief is due to visit London on Monday, it is understood.

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The CARF regulation, which brings crypto under global tax reporting standards akin to traditional finance, marks a crucial turning point.

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Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

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Rachel Reeves hints at tax rises in autumn budget after welfare bill U-turn

Rachel Reeves has hinted that taxes are likely to be raised this autumn after a major U-turn on the government’s controversial welfare bill.

Sir Keir Starmer’s Universal Credit and Personal Independent Payment Bill passed through the House of Commons on Tuesday after multiple concessions and threats of a major rebellion.

MPs ended up voting for only one part of the plan: a cut to universal credit (UC) sickness benefits for new claimants from £97 a week to £50 from 2026/7.

Initially aimed at saving £5.5bn, it now leaves the government with an estimated £5.5bn black hole – close to breaching Ms Reeves’s fiscal rules set out last year.

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Rachel Reeves’s fiscal dilemma

In an interview with The Guardian, the chancellor did not rule out tax rises later in the year, saying there were “costs” to watering down the welfare bill.

“I’m not going to [rule out tax rises], because it would be irresponsible for a chancellor to do that,” Ms Reeves told the outlet.

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“We took the decisions last year to draw a line under unfunded commitments and economic mismanagement.

“So we’ll never have to do something like that again. But there are costs to what happened.”

Meanwhile, The Times reported that, ahead of the Commons vote on the welfare bill, Ms Reeves told cabinet ministers the decision to offer concessions would mean taxes would have to be raised.

The outlet reported that the chancellor said the tax rises would be smaller than those announced in the 2024 budget, but that she is expected to have to raise tens of billions more.

It comes after Ms Reeves said she was “totally” up to continuing as chancellor after appearing tearful at Prime Minister’s Questions.

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Why was the chancellor crying at PMQs?

Criticising Sir Keir for the U-turns on benefit reform during PMQs, Conservative leader Kemi Badenoch said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.

Sir Keir did not explicitly say that she would, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

In her first comments after the incident, Ms Reeves said she was having a “tough day” before adding: “People saw I was upset, but that was yesterday.

“Today’s a new day and I’m just cracking on with the job.”

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Reeves is ‘totally’ up for the job

Sir Keir also told Sky News’ political editor Beth Rigby on Thursday that he “didn’t appreciate” that Ms Reeves was crying in the Commons.

“In PMQs, it is bang, bang, bang,” he said. “That’s what it was yesterday.

“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”

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