Bloomberg Audio Studios, podcasts, radio news. The Prime Minister was saying that he wants to restore the aid budget to zero point seven percent of GDP and to get defense back up to or to get defense up to three percent of GDP. This implies a much bigger state, and even with strong growth, it seems not remotely possible within the fiscal rules without big tax cut rises or big spending cuts. Do you agree.
We set out a clear plan for taking defense spending to two point five percent of a GDP by twenty twenty seven, and that will be funded by cuts in overseas development assistance. That is the right thing to do given the threats we face from Russia on the continents of Europe. As strong economy depends on strong national security and strong defense, which is why we've made that decision to invest in our defense capability.
But beyond for the next parliament would be three percent of defense spending is the ambition, and that's when it would get more difficult within the fiscal rules and without big cuts or big tax races.
The Prime Minister was really clear yesterday, Yes, we want to take defense spending to three percent of GDP. Given the threats that we face, but that will be dependent on economic and fiscal circumstances and also military need. But we've set out that fully funded, fully costed plan in the next two years to take defense spending to two and a half percent of GDP, to improve our national security and to make our economy and our country stronger.
The promise is going to be meeting President Trump on Thursday. You have just increased defense spending, which is obviously what he would like. Do we hope to get anything in return? Do we hope, for example, for him to withdraw the threats of twenty percent tariffs possible?
We've increased defense spending to improve the security of Britain and it's in our national interests to do that. The Prime Minister will be meeting President Trump to discuss a range of issues. But it is important that right across Europe we increase spending on defense to play our full part within NATO and to keep the consonants of Europe
safe against Russian aggression. In terms of the future trading relationship between the UK and the US, last time that President Trump was in the White House, trade and investment between our two countries increase, and I have every confidence that that can happen again, and I know that the Prime Minister looks forward to talking about those issues and many others in his meetings with Donald Trump tomorrow.
Obviously there is talk about peace deal in Ukraine within weeks. The US hope would be would that be good for growth globally? Would it be good for growth in the UK? Is this something you'd be hoping for?
I set out in my G twenty contribution at the Finance Minister's meeting today the importance of peace. But are just and durable at peace and that is what the people of Ukraine need and deserve, and that is what will contribute to a stronger economy. The human sacrifice in Ukraine has been immense. But of course Russia's illegal invasion of Ukraine has also placed a heavy burden on the global economy, with higher energy prices, higher food prices, and
destruction to a global trade. But first and foremost, this is about protecting the sovereignty of Ukraine and protecting the security of Europe.
But you think a peace dividend might bring a growth dividend as well.
Well. There's no doubt been the case that Russia's invasion of Ukraine has played a role in the higher inflation and the weaker growth that we've seen, but it is essential that it's a just and a durable piece if we are to get the benefits both the Ukraine and indeed for the global economy.
We've had to slash our aid budget to afford the defense spending. The US are doing the same, Sweden, France, Germany they're also reducing their aid spending. Does this mean that the test has given up on the developing world?
The world has changed hugely in just the last few years since Russia's invasion of Ukraine. It's a wake up call to countries around the world, but particularly in Europe. And it's right that we have increased spending on defense. To take us to two point five percent of a GDP is a fully costed and a fully funded plan. It's in our national interest to do so, and that is why we're taking that action.
Do you think it's a risk that China and Russia possibly could fill the gap if we leave, if we take our foot off the pedal for development assistance in the developing world.
I think it's important that countries play their full role in both providing defense and in providing aid. Britain has made the decision, the right decision, to protect our national security, to strengthen our defense in the face of Russian aggression, and that's why we've increased defense spending. Our increasing defense spending to two and a half percent of GDP. That's the choice that we have made. It's in the national interest.
It's also good for the economy because a strong economy depends on strong defense and strong.
Security, and which just finally, then you've had two OBR forecast rounds. Can you confirm that the March twenty sixth fiscal event will not be the fiscal event It will just be a group of OBR forecasts.
As you as you originally said it would be, but the Officer Budget Responsibility going through their process at the moment in terms of providing a forecast. I'm not going to give a running commentary on that, but I will respond to it on the twenty sixth of March. And the fiscal rules that I set out in the budget in October that Parliament have endorsed a non negotiable and we will take whatever action is necessary to continue to meet those fiscal rules.
So not ruling out a possible fiscal event.
I'm not going to provide a running commentary on the ongoing OBR forecast. We took the action that was necessary in October to put our public finances on a firm footing. But whatever the OBI say in March, I am very clear we need to go further and faster to grow our economy, and further and faster to improve and reform our public services, including improving productivity in our public services.