{"id":499770,"date":"2026-03-28T08:45:09","date_gmt":"2026-03-28T08:45:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/499770\/"},"modified":"2026-03-28T08:45:09","modified_gmt":"2026-03-28T08:45:09","slug":"inside-cabinet-tensions-over-tax-cuts-as-economy-spirals","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/499770\/","title":{"rendered":"\u00a0Inside Cabinet tensions over tax cuts as economy spirals"},"content":{"rendered":"

In a rare glimpse this week of how concerned Sir Keir Starmer is by the consequences of the Iranian conflict<\/a>, he warned that the manner by which it concludes \u201ccould define us for a generation\u201d. <\/p>\n

It will certainly define his Government. As with so much of the UK\u2019s fortunes, the impact of global events dictates governmental decision-making <\/a>perhaps more keenly than those of our international counterparts.<\/p>\n

This is undoubtedly felt most acutely by Rachel Reeves<\/a>, who has witnessed her economic plans go up in a plume of Middle Eastern smoke, and now faces ever-growing demands from an increasingly diminishing pie.<\/p>\n

New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n

The predicament confronting the Chancellor emerged twice this week. First, when the Organisation of Economic Co-operation and Development (OECD) warned that the UK will suffer the biggest hit to growth in the G20, as a result of the Iran war that will tip it close to recession.<\/p>\n

Then came the news that the Royal Navy was forced to borrow a warship from Germany<\/a> to carry out its duty commanding a Nato taskforce next month. It underlined the need to dramatically ramp up defence spending, and just how underprepared the country is for the rapidly changing world.<\/p>\n

\u2018A nightmare for Reeves\u2019<\/p>\n

Former shadow Chancellor Ed Balls neatly summed it up on his Political Currency podcast when he said: \u201c[Starmer] is saying we\u2019re going to tackle the cost of living\u2026 We\u2019re going to sort out the problem of the energy crisis. He says we\u2019re going to spend more on defence, and we\u2019re going to do it quickly\u2026 If you are Rachel Reeves in the Treasury at the moment looking at all of this\u2026it is a total nightmare.\u201d<\/p>\n

Sympathy for Reeves\u2019s situation is in abundance within Westminster, but there is also a simmering frustration that the leadership has not been bolder when it comes to growth, particularly at a time of crisis.<\/p>\n

\u201cIt\u2019s really frustrating for Rachel,\u201d a Cabinet member told The i Paper. \u201cBecause the Spring Statement felt really positive. We had started to make progress, getting business confidence up, getting growth, putting more money in people\u2019s pockets \u2013 but we\u2019ll just have to see what happens now.<\/p>\n

\u201cWe\u2019ve said the cost of living is the number one issue, and when we\u2019ve hung so much on helping people with it \u2013 it\u2019s difficult if that\u2019s then buffeted by external events.\u201d<\/p>\n

Asked whether there was belief at the top of Government of the need to take more decisive action on economic growth, the minister replied: \u201cYes, there are a lot of conversations live at the moment in the context of the Iran situation on how we do that.\u201d<\/p>\n

A \u2018dogmatic approach\u2019 from The Treasury<\/p>\n

But while there is agreement on the need to do more, vested interests and the \u201cdogmatic\u201d approach from the Treasury means pushing through such policies remains near impossible. <\/p>\n

One example is that ministers are now looking at how they can coax British companies that moved to the Middle East to benefit from cheaper energy costs back to the UK and set up industry on these shores once more. <\/p>\n

\u201cThese firms are now thinking it\u2019s not that stable and so there could be opportunities [for us] there,\u201d the minister said, before adding: \u201cThe biggest challenge is about changing the culture in Whitehall and the Treasury and them understanding the growth opportunities in industry in this country. The PM gets it, Rachel gets it. But that\u2019s where we should try and push.\u201d<\/p>\n<\/p>\n

Another blockage, or \u201cchallenge\u201d as the minister put it, is Ed Miliband\u2019s Department for Energy Security and Net Zero, which is opposed to such energy intensive, fossil fuel guzzling companies returning to these shores as it runs counter to the zero carbon agenda. <\/p>\n

A different minister complained over the Treasury\u2019s refusal to entertain policy suggestions to attract the brightest minds around the world by offering visas with lucrative tax breaks. \u201cAs soon as you mention anything about tax they shut it down,\u201d the minister sniffed.<\/p>\n

Such intransigence is only likely to further fuel frustration within Westminster and beyond as the competing demands from the fallout of the Middle Eastern crisis come into sharper focus. Reeves has promised \u201ctargeted\u201d energy bill support to help the poorest households deal with the looming spike in energy prices, while the need for more defence spending has come under even greater scrutiny. <\/p>\n

\u2018British Army could barely seize a small market town\u2019<\/p>\n

As well as the UK\u2019s stretched naval resources, this week saw General Sir Richard Barrons, the former commander of Joint Forces Command, warn that the British Army could barely \u201cseize a small market town, on a good day\u201d.<\/p>\n

The parlous state of the Armed Forces prompted Lord West, the former head of the Royal Navy and a Labour peer, to demand more spending on defence. \u201cWe need the money that Starmer said would be provided earlier at Munich,\u201d he told The i Paper. \u201cHe said at Munich that he\u2019d pull that 3.5 per cent earlier into this Parliament. That needs to be done. Money needs to be spent today.\u201d<\/p>\n

But increasing spending on defence has only become harder as a result of the economic shock caused by the Iran war and the ongoing chokehold the regime has on the Strait of Hormuz.<\/p>\n

\"(FILES)
Crew members stand on the deck of HMS Dragon, a Royal Navy Type 45 Daring-class air-defence warship (Photo: Justin Tallis\/AFP via Getty)<\/p>\n

As Ben Judah, a former foreign office adviser to David Lammy, pointed out at a conference this week, the Middle Eastern conflict meant there would be \u201cless money available for defence\u201d \u2013 despite the fact that \u201cdefence spending needs to go up and it needs to go up faster\u201d.<\/p>\n

While the full impact of the energy crisis on the UK is yet to be fully understood, the longer it continues the bigger the hit will be to the country\u2019s finances, raising the prospect that Reeves could be forced to hike taxes once again in her Autumn Budget, bringing with it all the political consequences.<\/p>\n

One Labour backbencher attempted to put a positive spin on the situation, claiming it would ram home the need for more defence spending. <\/p>\n

\u201cThe [economic] situation is utterly horrible and horrific and it\u2019s terrible. But there\u2019s also a massive opportunity here. Primarily on defence,\u201d the MP said, suggesting that if tax rises were framed by the need for more defence spending the public would understand.<\/p>\n

\u201cThe public would go, \u2018Sure we see the risk now, you\u2019ve got us\u2019. So there\u2019s a gap where you would get licence from the public to do quite a lot, as long as you were really clear what you were doing it for.\u201d<\/p>\n

Another Labour MP made a more novel suggestion. \u201cIf we do end up having to do tax rises, we should be very clear about the branding \u2013 we should call it a Trump tax.\u201d<\/p>\n

Such labelling is unlikely to appease voters, however, regardless of how much they are likely to blame the US President for the difficulty the UK Government now finds itself in. Further tax rises are likely to be unpopular.<\/p>\n

Starmer was right when he said this war will have far-reaching consequences, it will not be long before he discovers what it means for him.<\/p>\n","protected":false},"excerpt":{"rendered":"In a rare glimpse this week of how concerned Sir Keir Starmer is by the consequences of the…\n","protected":false},"author":2,"featured_media":499771,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,141,1294,585,1445,13207,2142,56,54,55],"class_list":["post-499770","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-donald-trump","tag-economy","tag-iran","tag-rachel-reeves","tag-recession","tag-sir-keir-starmer","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/499770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=499770"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/499770\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/499771"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=499770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=499770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=499770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}