Thinktank Urges Tax Rise on Middle Earners for Defence

The Resolution Foundation, a prominent UK thinktank, has advised Chancellor John Healey that significantly increasing defence spending necessitates a rise in taxes for middle earners. This recommendation stems from the thinktank's analysis of the UK's "tax wedge," which it argues is internationally low and must be elevated to meet defence ambitions. The thinktank's report highlights that current defence spending levels are insufficient to address evolving geopolitical challenges and meet the UK's commitments to international security.

John Healey, who previously served as the Secretary of State for Defence, resigned from Keir Starmer's government in June 2026. His resignation was a protest against the then-prime minister's perceived failure to adequately fund the defence sector. Healey had consistently advocated for a more robust military budget, emphasizing the need for substantial investment in military capabilities and personnel. The Resolution Foundation's current proposal aligns with Healey's long-standing concerns regarding defence underfunding, suggesting a potential pathway for him to implement his vision should he be in a position to influence fiscal policy.

The thinktank's argument is predicated on the idea that a higher "tax wedge" – the difference between an employer's total cost for an employee and the employee's net take-home pay – is a necessary fiscal lever. By increasing this wedge, the government can generate additional revenue. The Resolution Foundation suggests that this revenue should be specifically earmarked for defence, thereby ensuring that increased tax burdens on middle-income households directly contribute to national security enhancements. This approach aims to create a clear link between citizen contributions and defence capabilities, potentially garnering public support for such fiscal measures.

This proposal comes at a time of heightened global instability, with numerous countries re-evaluating their defence budgets and strategic priorities. The UK, like many of its allies, faces complex security threats that require sustained and significant investment in its armed forces. The Resolution Foundation's recommendation to tax middle earners is a direct response to this challenging environment, proposing a specific funding mechanism for defence ambitions that acknowledges the fiscal constraints faced by the government. The thinktank's emphasis on the "tax wedge" suggests a focus on the efficiency and fairness of the tax system in generating revenue for critical public services like defence.