UK Defense Budget: Tax Hike on Middle Earners Looms

The UK faces a £28 billion annual budget gap to meet its 2035 defense pledge of 3.5% of GDP. Resolution Foundation's 'Thin End of the Wedge' report warns that meeting this target will require tax hikes on middle earners, despite Labour's £70 billion tax increases since 2024. The UK's 'tax wedge' (earnings tax minus benefits) stands at 32.4%, below the OECD and G7 averages. Higher-spending OECD nations typically impose greater burdens on average workers. John Healey must secure £1.4 billion in additional revenue by October 28.

If middle earners resist tax hikes, the fairness of defense spending distribution could come under scrutiny.