As everyday Brits continue to feel the pinch, a new financial reality may be on the way: higher taxes could be looming.
With the Labour government making big promises on defence spending and NHS investment, ministers are under mounting pressure to explain how they’ll pay for it all — especially as Labour MPs are already pushing back hard against proposed welfare cuts meant to help plug the gap.
Starmer Commits to Massive Defence Spending Under NATO Pressure
Prime Minister Keir Starmer is in The Hague this week for a major NATO summit, where he’s signed the UK up to spend 3.5% of its GDP on defence — a significant increase from current levels.
An extra 1.5% will also be committed to broader security efforts like cyber defence, a move largely pushed by U.S. expectations under Donald Trump’s renewed NATO demands.
The challenge? The new defence package will cost the UK about £30 billion more than current plans.
But so far, ministers haven’t offered much detail on where that money will come from — and Chancellor Rachel Reeves is already walking a tightrope trying to balance the books.
NHS Spending Surges While Cuts to Welfare Spark Rebellion
This bold NATO pledge comes on the heels of another major financial promise.
Earlier this month, Reeves unveiled a huge spending plan for the NHS, pouring tens of billions into improving healthcare.
Yet now the government faces backlash from within its own ranks over a separate plan to tighten access to disability benefits and get more people back into work.
That plan was supposed to save the government about £5 billion — but more than 100 Labour MPs have now backed an amendment that could kill the bill outright during a July 1 vote.
It’s a brewing rebellion that risks blowing a hole in the party’s budget and unity.
Labour MPs Push Back Against Disability Benefit Cuts
The pushback isn’t coming from fringe voices.
Among those opposing the benefit cuts are some of Labour’s own top committee chairs — including Dame Meg Hillier (Treasury), Debbie Abrahams (Work and Pensions), and Helen Hayes (Education).
Hayes, who previously served as a shadow education minister, didn’t mince words.
She said the cuts to Personal Independence Payment (PIP) could drive people with disabilities further into poverty and even force some out of work altogether.
“This is unjustifiable,” she said. “Ministers must rethink to get this right.”
Real Fears That More Brits Will Be Pushed Into Poverty
The amendment signed by MPs argues that the proposed changes could push 250,000 people into poverty, including 50,000 children.
It also criticizes the government for failing to consult disabled people and points out that a proper analysis of how the changes would affect employment won’t even be available until autumn.
Starmer Faces Mounting Pressure — and a Possible U-Turn
With Labour’s large majority suddenly at risk, there’s growing talk of whether Starmer might be forced into another awkward U-turn.
Chancellor Reeves, for her part, insists there won’t be major concessions — but behind the scenes, discussions are clearly underway.
Cabinet Office minister Pat McFadden admitted on Tuesday that the rebellion was “very serious.”
To complicate matters, Deputy PM Angela Rayner hasn’t ruled out disciplinary action against Labour MPs who vote against the party line — with some rebels even warning they could break away and form a “Labour 2” faction if the leadership cracks down.
Experts Warn Tax Hikes May Be Unavoidable
Even if Reeves avoids making immediate tax hikes, economists aren’t convinced.
Paul Johnson from the Institute for Fiscal Studies says that if spending continues to rise in only one direction, then tax is inevitably going to follow.
“Historic increases already this decade. Looks like a lot more to come,” he warned.
NHS Boost Could Still Fall Short Despite Billions
Despite Reeves putting a massive £29 billion a year into the NHS, experts still say that might not be enough — especially now that even more money is being directed toward defence.
Other government departments are bracing for cuts, and Reeves has openly acknowledged that many parts of the country haven’t yet seen the “change” Labour promised in their election victory.
She’s made it clear that her priority is helping regions beyond London and the South East, but delivering that while managing soaring costs could mean revisiting the tax question sooner than she’d hoped.