British Prime Minister Boris Johnson.
British Prime Minister Boris Johnson on Thursday announced a £ 16.5 billion (US $ 22 billion) increase in military spending over the next three years, the largest since the end of the Cold War, despite measures to combat the coronavirus pandemic being public Deficits and debt have caused it to reach historic heights.
Johnson revealed the first results of a comprehensive defense and foreign policy review in a speech to Parliament Thursday as the UK tries to define its post-Brexit role in the new global environment.
The UK, with a current defense budget of £ 42 billion, is the only European country (apart from Greece) that has honored NATO's pledge to spend more than 2% of its gross domestic product on defense spending.
In particular, new funds will be allocated to strengthening space defense capabilities and creating a new national cyber force.
Chancellor of the Exchequer Rishi Sunak is due to present a "spending review" next week that will reveal budget deficits of more than 5% of GDP in the coming years.
According to the Institute for Fiscal Studies, an independent think tank, the budget deficit will exceed 17% of GDP this year.
The outlook: Tax hikes and spending cuts are just around the corner and the budget revision has to be tightened after Johnson's defense ruling. Sunak's work just got more difficult. After addressing the coronavirus pandemic and the impending Brexit shock, he must find a way to fund his boss's geostrategic vision.
This may require decisions that can dampen recovery from the virus. In and of itself, higher military spending will add to the huge fiscal stimulus launched after two waves of COVID-19. But Sunak has to decide how quickly to tackle the budget problem. Some spending will of course stop as the pandemic recedes. However, it is difficult to see how the UK can avoid a major tax hike – the question is when that will happen.
Oct. 2020: Boris Johnson faces Conservative Party unrest as Rishi Sunak emerges as a possible alternative leader