Cabinet ministers arriving in Downing Street on Tuesday morning were surprised to be handed documents which detailed the slashing of the foreign aid budget in favour of boosting UK spending on military kit. If they’d read the runes, they wouldn’t have been quite so shocked.
Tuesday’s Cabinet meeting and ensuing statement in Parliament was the culmination of weeks of groundwork by Keir Starmer, which had started at another six-hour Cabinet meeting at Lancaster House on 7 February. The plan to slash aid spending was finished by a tight-knit group of advisers last weekend, but Starmer had already set a trail of crumbs for keen observers.
During the marathon Cabinet session three weeks ago, Starmer noted how domestic instability is linked to global trends, how migration is easier than ever before and how insecure oil and gas prices are. It’s a subject he had been mulling even before he took power last year. He was noting how world politics are shifting.
Starmer was also facing a confluence of pressures. The Strategic Defence and Security Review (SDSR), led by Lord George Robertson, a former Labour Defence Secretary and Secretary General of Nato, is expected to report an assessment of the UK’s strategic interests and requisite military requirements in the next few weeks.
Separately US President Donald Trump had been kicking off about Europe spending more on its own defence. Taken together, it was crunch time.
“You can’t get away from the fact that Trump’s interventions have firmed up thinking at the top of government about defence spending. But actually, the Prime Minister has spent a lot of time and energy both in opposition and recent weeks thinking about how to properly finance the SDSR and make sure domestic industries benefit from the change in priorities” a No10 source told The i Paper.
In a letter to the Cabinet earlier in the month, Starmer wrote, “if governments are not changing the system in favour of working people, then voters will find someone else who does”. He meant Reform UK and went on to say that Labour had lost its way on migration because “we ended up treating all immigration as an untrammelled good”.
There’s no doubt Starmer has been on a political journey. Only five years ago he said the free movement of people is one of the better reasons for European Union membership, a key argument Tony Blair used to make. On Tuesday, at a stroke Starmer wiped out that signature Blairite commitment to increasing aid spending to 0.7 per cent of Gross National Income. He also broke a pledge in the party’s 2024 manifesto.
Starmer said the aid budget would be reduced from 0.5 per cent to 0.3 per cent in 2027, “fully funding the investment in defence”, which will rise from 2.3 per cent of GDP.
But Labour MPs widely believe that the ramping up of military spending will have to be funded by cuts across departments, including slashing the welfare bill in order to protect ringfenced areas such as the NHS.
Even if he is in line with public sentiment, Starmer certainly hasn’t taken his party with him. Ministers are busy protesting too much that the Cabinet is united while some backbenchers are furious, describing the change as “taking food from out of the mouths of starving children in Africa”.
Starmer slightly redeemed himself in Labour MPs’ eyes at Prime Minister’s Questions on Wednesday by flattening Conservative leader Kemi Badenoch. Again.
“Over the weekend, I suggested to the Prime Minister that he cut the aid budget, and I am pleased that he accepted my advice,” Badenoch told Starmer.
“I’m going to have to let the leader of the opposition down gently. She didn’t feature in my thinking at all. I was so busy over the weekend I didn’t even see her proposal. I think she’s appointed herself… saviour of western civilisation. It’s a desperate search for relevance,” he replied. Hard to come back from that.
Badenoch was on stronger ground when she challenged Starmer over whether the new defence money will fund the controversial Chagos Islands deal, to which he replied that the US is examining the plans. That’s not a no.
But Starmer has also made it clear he got no pleasure from slashing the aid budget. He’s a keen enough student of world affairs to know that China is winning the race for soft power, particularly in the global south.
That’s partly why Chancellor Rachel Reeves is in early discussions about future funding solutions to pay for the defence uplift. She’s not the only European politician looking for ways to increase defence capabilities at a time of tightly constrained national budgets and is holding talks with other finance ministers at a G20 meeting in Cape Town.
One proposal is a “rearmament bank” to tap into European savings; by leveraging national guarantees, a bank would allow countries to boost spending without increasing their balance sheets upfront. Another is a suggestion from European Commission President Ursula von der Leyen to briefly lift the EU’s fiscal rules to allow countries to borrow more to increase defence spending without affecting their budgets.
While Reeves is interested in the ideas, as neither would break her fiscal rule not to borrow for day-to-day spending, she is understood to be reluctant to borrow more to fund future defence budgets without cutting government spending first or without a credible plan to pay for additional debt.
Starmer flies to Washington on Wednesday afternoon for perhaps the definitive meeting of his premiership with Trump and with praise from US Defence Secretary Pete Hegseth in his back pocket.
But Starmer faces a daunting task: to try to mould Trump’s position both on Ukraine and Britain’s domestic priorities, just as French President Emmanuel Macron tried earlier this week.
Starmer is one of the last centre-left politicians left standing in Europe. Whether his shift to the right can tame Trump is an immediate concern. Whether he can rely on the support of his Labour Party when he gets back is another question entirely.
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