The Resolution Foundation has urged Chancellor John Healey to prepare to raise taxes on middle earners to help finance Labour’s military expansion. Its economists argue that meeting the government’s defence pledge would require another £28bn a year, and that average workers will have to contribute more.
Labour has committed to spending 3.5 percent of GDP on defence by 2035, matching the core military spending target agreed by NATO last year. The pledge ties Britain’s public finances to the expansion of the US-led imperialist alliance’s military power.
Healey resigned from Keir Starmer’s government in June because he considered its military funding inadequate. Having moved into the Treasury under Andy Burnham, he now plans to wait until next year’s spending review before setting out how the larger commitment will be financed. The argument within Labour concerns the pace and funding of rearmament, with its underlying imperialist purpose accepted.
In its report, Thin End of the Wedge, the Resolution Foundation points to tax increases announced since Labour took office in 2024, worth £70bn a year. These produced the largest increase in the OECD’s “tax wedge” last year. This measure of taxes on earnings, minus benefits, reached 32.4 percent for a single earner on average pay, remaining below the OECD and G7 averages.
The Foundation also argues that the tax burden on someone earning the median salary of £33,000 remains below its level before the 2008 financial crisis. Calling these workers middle earners doesn’t change their class position. They still depend on selling their labour to meet housing, food and energy costs. A comparison with tax rates nearly two decades ago says little about how much of their wages remains after paying for those necessities.
“No other OECD rich country has a bigger state and a lower burden on average workers, so any politician promising both is not being realistic,” said the Foundation’s chief economist, James Smith.
This turns the existing tax arrangements of capitalist states into a lesson in what workers must accept. The comparison describes how those governments distribute the burden of taxation. The decision to expand Britain’s military, and the class interests served by that expansion, are treated as settled matters. Workers are then told to adjust their expectations around the bill.
Smith made the political assumption behind the proposal explicit:
“There is a strong case that any benefits of increased defence spending will be broadly shared, so the tax rises needed to find this should be too, including higher rates on middle earners.”
Arms companies stand to gain from publicly funded orders. Britain’s capitalist class benefits from a state capable of protecting its overseas investments, securing access to markets and resources, and projecting power alongside its imperialist allies. Military spending maintains the capacity to wage wars and impose the political conditions under which capital operates abroad. Describing these interests as a benefit shared across society erases the class divisions that shape British foreign policy.
Workers would help pay for this machinery through their wages while having no control over the investments and profits it serves. The state’s demand for national sacrifice recruits them into financing the power of their own ruling class.
The Foundation’s financial backing places its intervention in context. Its founder and chairman, Sir Clive Cowdery, built his business career in life insurance. The Resolution Trust he established supplied £2.56m in the year ending September 2025, approximately 61 percent of the thinktank’s total income. An institution sustained by a wealthy financier’s philanthropy is helping define what workers should surrender to finance the capitalist state.
Workers have already faced rising tax bills under Labour. Rachel Reeves’s biggest revenue measures included higher employer national insurance contributions and frozen income tax thresholds. Freezing thresholds allows the Treasury to take more as cash wages rise, drawing additional earnings into tax or higher bands even when workers’ purchasing power barely improves.
Burnham has promised to maintain Labour’s pledge against raising the rates of income tax, VAT or employee national insurance. Frozen thresholds demonstrate how such promises can coexist with a growing burden on wages. The Foundation’s intervention presses the government to accept further taxation of workers as a condition of delivering its military programme.
Healey’s first budget on 28 October will also need to find approximately £1.4bn a year over the next three years for Starmer’s existing defence investment plan, which he previously dismissed as inadequate. Meanwhile, households face rising winter energy bills and the government is under pressure to improve employment prospects for young people.
Those needs enter a budget debate already shaped by military commitments extending to 2035. The Resolution Foundation’s proposal helps turn those commitments into a claim on workers’ future wages, drawing resources for British imperialism from the people whose living standards it says it exists to improve.
