Resolution Foundation urges tax swap to fund £6bn defence boost

The Resolution Foundation, a Labour-affiliated think tank, has released a report calling for a major tax shift to fund an additional £6 billion for defence. It recommends shaving 2p per pound from National Insurance contributions for every worker while recouping the loss through a matching increase in income tax. Since a larger share of the population pays income tax, the change would raise the targeted sum.

Most employees would see little change to take-home pay, but those with dividend income, rental earnings or private pensions could pay more. The proposal arrives as Chancellor John Healey prepares the Budget, amid debates over Labour’s pledge not to raise taxes on working people. Economists say bold moves are needed to reassure bond markets and manage the government's shrinking fiscal buffer.