Torn between growing geopolitical tensions and constrained public finances, Britain's finance minister Rachel Reeves is set to unveil feared trade-offs in a government spending review on Wednesday. Prime Minister Keir Starmer is boosting the defence budget, and reports point to National Health Service (NHS) being bolstered -- forcing other key ministries to tighten their belts. - Defence priority -Reeves has amended her fiscal rules to allow the government more headroom for investment in the run-up to the spending review. Citing Russia's invasion of Ukraine, London has announced it will increase its defence budget to 2.5 percent of UK gross domestic product by 2027 -- and up to 3.0 percent by 2034, helped by cutting international aid. "U-turns on benefit and welfare spending, increased pressure to ramp up defence spending and higher borrowing costs have left the chancellor, Rachel Reeves, in a sticky position", concluded Ruth Gregory, deputy chief UK economist at Capital Economics.
