As the cost of living continues to weigh heavily on millions of UK households, there’s fresh concern that taxes could soon be on the rise.
Why? Because Prime Minister Keir Starmer is pledging serious cash for national defence and the NHS—while his own MPs are pushing back hard against proposed welfare cuts designed to help pay for it.
Billions More Pledged for Defence and Cybersecurity
Starmer heads to The Hague today for a major NATO summit, after making a bold commitment to ramp up defence spending to 3.5% of GDP.
That includes an additional 1.5% to bolster cyber security and related efforts—funding reportedly demanded by Donald Trump as part of broader NATO commitments.
Currently, Britain spends around 2.33% of GDP on defence, with a pledge already in place to hit 2.5% by 2027. But reaching 3.5% would require an additional £30 billion—money that the government hasn’t explained how it’ll find.
Rachel Reeves Already Stretched by NHS Spending
The strain on public finances is real. Just weeks ago, Chancellor Rachel Reeves committed tens of billions to improve the NHS in her first major spending review.
But with this new defence pledge, the pressure is intensifying.
Reeves has said there’ll be no more sweeping tax hikes—but experts think that might be wishful thinking.
Economist Paul Johnson of the Institute for Fiscal Studies didn’t mince words.
“If spending only goes one way, then so, inevitably, will tax,” he said, warning that historic tax rises seen already this decade may just be the beginning.
Welfare Reforms Spark Fierce Labour Backlash
Meanwhile, Starmer and Reeves are facing a major mutiny within their own ranks.
Plans to tighten disability benefit criteria and encourage more people back into work—intended to save around £5 billion—have met fierce opposition.
No fewer than 108 Labour MPs have now signed an amendment that would effectively block the welfare reform bill from advancing.
A vote is set for July 1, and the rebellion is growing by the day.
Labour MPs Say Reforms Could Push 250,000 into Poverty
The amendment itself doesn’t reject reform outright but criticises the government’s approach.
It argues the current plan would push 250,000 people—including 50,000 children—into poverty.
It also highlights that there’s been no formal consultation with disabled people, and key impact assessments from the Office for Budget Responsibility won’t be published until autumn.
Senior MPs from across the party—chairs of major committees including Treasury, Education, and Work & Pensions—have all signed the amendment.
Helen Hayes, chair of the Education Committee and a former shadow minister, said bluntly: “The cuts to PIP will push some disabled people out of work and increase poverty. That’s unjustifiable.”
Pressure Mounts on Starmer and Reeves
The scale of the rebellion is so significant it could overturn the government’s hefty Commons majority.
With the vote looming, Cabinet Office Minister Pat McFadden acknowledged the seriousness of the situation, promising “discussions” with MPs.
Deputy PM Angela Rayner has refused to rule out disciplinary action against rebel MPs, sparking threats from some that they might form a breakaway “Labour 2” faction if punished for their stance.
Backpedalling on Pensioner Cuts, Too
Adding to the growing political headaches, Starmer has already walked back on plans to cut winter fuel payments.
After a public backlash, the PM agreed that more pensioners will remain eligible for the benefit—a move that further shrinks the room to save money.
NHS Investment Front and Centre
At the heart of Labour’s economic strategy is a £29 billion-a-year increase in NHS funding.
Reeves has positioned this as central to Labour’s mission to rebuild public services—but even before the new defence spending pledge, analysts were warning that tax hikes might be unavoidable.
Reeves insists she won’t launch a fresh “tax raid” to fund her plans, but economists question whether that’s realistic.
Especially as the budget squeeze will likely hit other departments outside of health and defence.
A Balancing Act That’s Getting Harder
Reeves has admitted that “too many people in too many parts of our country” haven’t yet felt the benefits of Labour’s election win last year.
Her goal is to channel investment into underfunded regions—especially outside London and the southeast.
But with mounting pressure from defence commitments, NHS needs, and a fiery internal revolt over welfare reforms, the government’s balancing act is only getting more difficult.