It was a week that shook the world. The spilled Ukrainian blood counted for nothing as Donald Trump openly sided with Russia to achieve a peace that can only reward it for its unilateral aggression. As profoundly, the US president has launched a new era in which might is right, “strong” men carve up the globe, and international law and multilateral institutions are eviscerated. Nor, as the former head of MI6 Alex Younger told BBC’s Newsnight, is there any going back.
Britain may be only a middle-ranking power but, given the politics and defence capacity of the rest of Europe, it now has a special responsibility – in its own interests as much as Europe’s – to take a lead in creating a functioning order to replace the old. Andto do its very best to secure a just peace in Ukraine. For all its modest standing, Britain still retains important political and strategic assets. They must be deployed.
First and foremost, Britons overwhelmingly recognise Vladimir Putin and Trump for who they are, that Ukraine’s battle is existential and that what we have done before we may have to do again. Our populist right, in the guise of Nigel Farage, is on the defensive much more than its counterparts in mainland Europe. Politically, the geopolitical challenges confronting Keir Starmer are as profound as those of 1945 or 1989: but also the opportunity to demonstrate defence and moral leadership.
A reset in transatlantic relations was increasingly likely under any US president, given public opinion there. But even a president with as primitive America-first-and-only views as Trump must ultimately recognise that undermining $4tn of US foreign direct investment in Europe – dwarfing Ukraine’s imagined mineral wealth – is not in US interests. He will also learn that, as two-thirds of America’s imports come from affiliates of US multinational companies operating overseas, placing tariffs on them is to tax yourself. US defence spending is presented by both Trump and western leaders as a kind of free public good offered as an American gift to the world. Wrong. It was the vital adjunct to protect US economic, trade and financial interests. It is to US advantage to play a backstop security role in Europe even as Europe does more to help itself – the message Starmer must take to Washington this week.
Yet the fact remains that, confronted by new dangers, the UK has to raise defence spending. We need an army large enough to shoulder our proportionate share in any joint European security, now recognised as a necessity, and vastly strengthened air and naval defences. The mismatch between rhetoric – Britain will do what it takes on defence – and simultaneously accepting that an ultra-conservative interpretation of “fiscal rules” prohibits meaningful increased defence spending is unsustainable.
Putin and Trump will see it for what it is: weakness. Russia will not wait while the UK and Europe get their acts together; deterrence has to kick in now. On the other hand, the chancellor’s caution is grounded in a painful reality. Suddenly, British government debt is seen as the soundest in the G7 (as measured by the price of credit default swaps), in part because the financial markets believe Reeves’s tough fiscal stance. Given that Britain’s precarious financial viability depends on the cold calculus of foreign investors, it is an asset that cannot be compromised even while we move to increase defence spending. But that requires finding more money more quickly.
Fortunately, there are resources to hand. The government is undertaking a politically risky “zero-based” public spending review of how every government pound is spent, aiming to reduce spending in real terms despite the legacy of austerity. It should apply the same rigour to the tax system and, in particular, argues the Institute for Government, to the £63bn of tax reliefs to business – 2.3% of GDP – the highest of any advanced industrial country. Many reliefs fail to produce the desired result, and should either be more closely focused or scrapped.
Nor should the taxation review stop there. The tax proceeds from wealth, especially from residential property, have fallen proportionately by half since 1980. Now is the moment to phase in a rational system of taxation based on today’s property values rather than a regressive council tax based, incredibly, on 1991 values. With other measures – increasing excise duties on fuel again, while freezing income tax and national insurance thresholds until 2028/29 – there is up to £40bn of additional financial wherewithal. If it has the will, the UK could lift defence spending to 3% of GDP by 2029, and use the balance to head off another unwanted round of austerity.
The tax rises would not be deflationary but, as a transfer from private spending and saving to higher public spending, expansionary. Another gain is that house prices may even fall a little. The public already half expects what needs to happen, but it has to be addressed as adults. Step up George Robertson, former secretary-general of Nato, who is completing a root and branch review of defence. Widely respected, he must explain his findings to all of us as part of a wider drive to spell out the choices. Politics in Norway and Canada show that patriotic progressivism can allow the left to go on the offensive.
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All this has to happen fast. On 19 May, Britain hosts a summit with EU leaders to discuss resetting the UK-EU relationship. This must be a moment when Europe agrees its collective security response – a potential European defence fund, common European defence procurement and enhanced military collaboration. The UK must use its newly found resources to take a lead. As a quid pro quo, it should insist on a big, generous deal to reverse shrinking UK-EU trade. Farage, along with the rightwing press, will instinctively want to cry sellout. But what is the alternative? Britain can be cordial to Trump without being the accomplice to Ukraine’s defeat and the weakening of European security.
Thus, amid the massive dislocation and threat there is an opportunity. The UK can better defend itself, protect its key public services, reflate its economy around higher defence spending, boost its ailing trade further to stimulate growth, become a co-leader in advancing Europe’s security and fashion a new transatlantic relationship. Moral, security and economic interests – and those of gallant Ukraine – are combined. It is also a political lifeline for a government mired in unpopularity. Labour must seize the moment.
Article by:Source: Will Hutton
