Reeves announces £2.9bn boost for MOD, but no exemption from private school VAT

The Ministry of Defence will receive a total increase of £2.9bn next year, Chancellor Rachel Reeves has announced.

As she delivered her first Budget she outlined her plans to ensure "the UK comfortably exceeds our Nato commitments".

"We will set a path to spending 2.5% of GDP on defence at a future fiscal event," she said.

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The Chancellor also said the UK would provide "guaranteed military support to Ukraine of £3bn per year for as long as it takes".

"Last week, alongside my right honourable friend the Defence Secretary [John Healey], I announced in addition to this, further support to Ukraine on top of our Nato commitment," she said.

"Through our £2.26bn contribution to the G7's extraordinary revenue acceleration agreement, repaid using profits from immobilised Russian sovereign assets."

Ms Reeves also cemented into her Budget the policy to apply VAT to private school fees from January 2025.

"Ninety-four per cent of children in the UK attend state schools," she said.

"To provide the highest quality of support and teaching that they deserve, we will introduce VAT on private school fees from January 2025 and we will shortly introduce legislation to remove their business rates relief from April 2025, too.

"We said in our manifesto that these changes, alongside our measures to tackle tax avoidance, would bring in £8.5bn by the final year of the forecast.

"I can confirm today that they will, in fact, raise over £9bn to support our public services and restore our public finances.

"That is a promise made and a promise fulfilled."

The move was controversial in military circles, with many asking for the Armed Forces to be exempt from the move.

The day before she delivered the Budget, the shadow defence secretary urged the Government to exempt military personnel from a hike to VAT on private school fees.

James Cartlidge, a former defence procurement minister in the previous Conservative government, said this could mean military families may be forced to choose between a career in the Armed Forces or their child's education.

It had been previously reported that the Defence Secretary was taking a "hard look" at a possible exemption for military families.

There was, however, an increase to the Continuity of Education Allowance (CEA).

This is a payment that helps military families pay for their children's education when they move frequently for service reasons.

The allowance is intended to help children receive a consistent education and develop relationships with their peers and teachers. 

Remembrance was also included in the Budget announcement, with Ms Reeves saying in her speech to MPs that as Remembrance Sunday approaches "it is vital that we take time to remember those who have served our country so bravely".

"I am today announcing funding to commemorate the 80th anniversary of VE and VJ Day next year to honour those who've served at home and abroad," she said.

The Chancellor also announced plans to dedicate a further £2m to Holocaust education.

"We must also remember those who experienced the atrocities of the Nazi regime first-hand," Ms Reeves said.

"I would like to pay tribute to Lily Ebert, the Holocaust survivor and educator who passed away aged 100 earlier this month.

"I am today committing a further £2m to Holocaust education next year so that charities like the Holocaust Education Trust can continue their work to ensure that these vital testimonies are not lost and are preserved for the future."