Keir Starmer’s commitment to increase the defence budget to three per cent of GDP in the next parliament will require difficult choices on tax and spending, analysts have warned.

The Prime Minister confirmed yesterday that defence spending will rise to 2.5 per cent of GDP by 2027, up from 2.3 per cent at the moment.

The increase will be funded by further cuts to the foreign aid budget, but Starmer also set out a “clear ambition” for defence spending to rise to three per cent of GDP by 2034.

Ben Zaranko, associate director at the Institute for Fiscal Studies (IFS), said “cuts to aid won’t be enough” if Starmer wants to push defence spending towards three per cent.

“Getting towards three per cent of GDP will eventually mean more tough choices and sacrifices elsewhere – whether higher taxes, or cuts to other bits of government,” he said.

Ruth Gregory, deputy chief UK economist at Capital Economics, said that the government was already “within a whisker” of breaking its fiscal rules, which limited its room for manoeuvre.

Unless the Chancellor tweaked the rules, Gregory said the government would need to either raise taxes or cut spending by 0.5 per cent of GDP, equal to around £20bn.

An alternative option reportedly under consideration is a European rearmament bank, which would borrow against capital provided by participating governments.