Labour wipes out a tenth of defence budget boost through NI hike

Almost a tenth of Labour’s £2.9billion defence budget boost will be wiped out by the Chancellor’s decision to hike employers’ National Insurance contributions (NICs), the Mail can reveal.

Ministers admitted the 1.2p rise would impact the Ministry of Defence directly – costing the underfunded department £216million in 2025-26.

This is equal to 8.6 per cent of the cash boost hailed by the Chancellor as proof of the Government’s commitment to supporting Ukraine and national security.

The Prime Minister has previously said his Government is committed to spending 2.5 per cent of GDP on defence, but Labour has been criticised for failing to clearly set out when this will happen, with total expenditure predicted to be £64.4billion – or 2.29 per cent of GDP – next year.

Responding to a written parliamentary question, minister for defence procurement Maria Eagle said: ‘The changes from April are expected to increase departmental costs by £216million. 

'The Chancellor has agreed to provide funding to the public sector to support with the cost of employer National Insurance contributions.’

Tory MP Dr Caroline Johnson, who unearthed the data, told the Mail: ‘Judging by the figures released by the minister, the MoD will have an enormous bill to foot... equal to 8.6 per cent of the £2.9billion promised increase to the defence budget.

‘Then on top, there will be indirect fees passed on by sub-contractors and suppliers because their employer’s NICs have also gone up. 

'The Government has given with one hand and taken away with another. It is unfortunately another example of how burdensome this rise will be for both the private sector and Whitehall.’

At the Budget, Ms Reeves said the Government would publish a Strategic Defence Review next year. She added that the increased defence budget would provide ‘guaranteed military support to Ukraine of £3billion per year’.

The Daily Mail’s Don’t Leave Britain Defenceless campaign is calling for an immediate rise in spending to 2.5 per cent of GDP.

A UK Government spokesman said: ‘At a time of geopolitical instability, we are fixing the foundations of UK defence to make Britain better defended, strong at home, and secure abroad.

‘The Ministry of Defence budget is increasing by £2.9 billion – a real terms increase of 5.9 percent compared to this financial year – so we can modernise our Armed Forces and continue to play a leading role in NATO.

‘We have agreed to provide funding to the public sector to support with the cost of employer National Insurance contributions, which will be confirmed at a future date.’