Keir Starmer wants to increase the UK defence budget from about £66bn in 2024-25 to 3% of GDP by 2029, adding up to £14bn each year. He told the Munich Security Conference: “We must build our hard power because that is the currency of our age.” However, this plan faces many challenges. Current government plans see defence spending rising slowly from 2.3% of GDP in 2024-25 to 2.6% in 2028-29. Starmer now pushes for a faster increase to 3% by 2029. But Labour backbenchers are focused more on issues like NHS waiting times and social care, which also need funding. The Treasury has strict borrowing limits to reduce the budget deficit, which has stayed at 5% of GDP for years. Chancellor Rachel Reeves set tight spending controls from 2027 to 2029, hoping better economic growth will help. The Office for Budget Responsibility (OBR) warns against relying on optimistic tax or borrowing forecasts. Economist Bee Boileau from the Institute for Fiscal Studies says that within current spending limits, finding extra money for defence is very tough. “You can’t find this kind of money from salami-slicing other departments,” she said. The OBR estimates a 3% GDP defence target would cost an extra £17.3bn by 2029-30, while other analysts estimate about £13-14bn. Ruth Gregory of Capital Economics warns that borrowing more to pay for defence is a risky idea. She said, “Debt-financed defence spending is not a big growth- or productivity-enhancing investment.” Starmer could raise funds through higher taxes, such as a 1.5p increase on income tax, on top of the current freeze on income tax thresholds that will already raise billions. Financial markets may react poorly to heavy borrowing for defence. The government also faces other costs like a £6bn overspend on special needs education and upcoming adult social care reforms. Economist Boileau noted, “It will be crucial what the OBR says about the public finances on 3 March to coincide with the chancellor’s spring statement.” The government awaits the economic outlook before deciding on budget space for higher defence spending.