Category Archives: Government Relations

Politics of Defence

The UK Government has today published its long-awaited Defence Investment Plan (DIP).

Due back in Autumn 2025, the plan aims to fund Britain’s Armed Forces into the next decade. In one of his final acts as Prime Minister, Sir Keir Starmer today announced an additional £15bn in funding for defence over four-years with money taken from other departments to pay for it. Nonetheless, the government has faced criticism from across Westminster on the funding allocation and the extent to which the DIP meets the challenges the country faces today and into the near future.

For the Prime Minister, this has come at a huge personal political cost. Lord Robertson, the highly respected lead author of the UK’s first independent Strategic Defence Review (SDR), published in June 2025, gave a carefully constructed speech in April directly criticising Sir Keir and Chancellor Rachel Reeves in what he described as a ‘corrosive complacency [today] in Britain’s political leadership’. More recently, two defence ministers, including the Secretary of State John Healey, resigned over the Prime Minister’s political weakness when faced with commitments to fund defence.

While the government has accepted the SDR’s 62 recommendations, the DIP today makes clear and sensible allocations in areas set out below and supportive of last year’s SDR. Yet at its heart, the monies still fail to add up to fund UK defence with many across defence industry and the military having already spoken to this fundamental point.

The plan itself focuses on cheaper, uncrewed autonomy, space, land lethality, cyber and electromagnetics in addition to £11bn to replenish the weapons and munitions sent to Ukraine and £63bn for the nuclear deterrent – it alone is some 20 per cent of the overall budget.

The 81-page plan delivered to Parliament by the new Defence Secretary Dan Jarvis, sets the course for defence spend of only 2.7% of GDP by 2030. Tan Dhesi MP, Chair of the Commons Defence Select Committee, said the government has not provided a ‘clear pathway’ to spending the committed three per cent of GDP on defence.

There remain unanswered questions over the allocation of funds for capital spend in an environment of large personnel expense and general fiscal realism. While the SDR set an ambition within tight spending envelopes, the DIP was meant to be a serious credibility test of government.

In a wider update to the Commons, Dan Jarvis did not rule out the UK joining a defence investment bank, an idea championed by former Bank of England Governor, Mark Carney, the now Prime Minister of Canada. This is something the Treasury has resisted. Of interest, former Health Secretary Wes Streeting asked Jarvis if the government would reconsider joining in the Commons earlier today.

Beyond equipment, the government has committed to invest £70m to support veterans through the Office for Veterans Affairs, including £12m investment in a new fund for reducing veteran homelessness.

Ultimately, all government policy, including defence, is Treasury-driven and what the PM thinks matters most; this most recent review and debate over funding secured the fate of Prime Minister Starmer. In a matter of weeks, the UK government will be under new leadership, faced with the very real and pressing challenges of national security. With visibility of government priorities and funding allocated, now the defence industry small and large can answer the government’s call and GK Strategy is ready to help with engagement, both in procurement and senior relationships in DE&S, Main Building and across Whitehall.

Please email Senior Partner and defence and security lead Scott Dodsworth to learn more. scott@gkstrategy.com

SD. Tuesday 30 June 2026

View from the US: Wealth taxes and universal income

Erin Caddell of GK Strategy’s American partner Anchor Advisors unpacks the prospect of wealth taxes on ultra-high net worth individuals and universal basic income to address heightened scrutiny of wealth inequality in the US

Stunning rise in tech wealth reignites policy debate about U.S. income inequality

The dramatic increase in market capitalization among US-based AI and other tech-related companies in recent years, encapsulated by last week’s whopper IPO for SpaceX, is reinvigorating a long-running debate about income inequality in America. Proposals for redistributive policies, such as wealth taxes and universal basic income (UBI), are gaining a new currency in US state capitals and in Washington DC.

The wealth creation of the AI boom is staggering. The SpaceX IPO made founder Elon Musk the world’s first trillionaire. Following Musk, the next nine richest Americans have a collective net worth of $1.7 trillion according to Forbes. All but one of whom (Warren Buffett) is a tech co-founder. Americans for Tax Fairness, a tax advocacy group, estimated that the net worth of America’s roughly 1,000 billionaires has increased by $1.5 trillion in 2025 to $8.2 trillion. Much of the rise is being driven by AI’s boost to tech content and infrastructure providers (as well as the tax cuts approved by President Trump and the GOP-controlled Congress last year).

The achievements of the ultra-rich in harnessing the promise of the latest technology revolution have drawn the ire of everyday Americans grappling with high inflation, increased healthcare costs and the threat of jobs being displaced by AI. This shift in public sentiment is turning on its head an old adage that Americans do not support higher taxes on the wealthy because many believe they, too, will become rich one day in the land of opportunity. A YouGov poll released in January found that 59% of Americans surveyed agreed that the government should pursue policies that narrow the gap between the rich and poor, with a majority of those Republicans surveyed agreeing that the wealth gap is a big problem. Compare this to 1939, when a Fortune magazine poll found only 35% of Americans surveyed felt wealth should be redistributed through higher taxes on the rich.

Policymakers looking for support to address income inequality can point to evidence that the gap between rich and poor is even wider now than in the Gilded Age of the late 19^th century when the technologies of the Industrial Revolution created the first cohort of the ultra-wealthy in America; and ultimately a backlash that led to the antitrust actions around the turn of the century, and later to establishment of the federal income tax in 1916.

Gabriel Zucman, a leading international scholar of wealth inequality, published a book in May with the wonderfully direct title ‘We Need to Tax Billionaires’. It found that the wealth of the top 0.0001% of the world’s richest families represented more than 16% of world GDP in 2025, up from 4% in 1910, and 3% in the mid-1980s.

The early skirmishes on the income-inequality debate are playing out in the American states, where public sentiment can be codified into policy more quickly than at the federal level. Earlier this year, the legislation in Washington state (home of Microsoft and Amazon) was passed and its governor signed a new 9.9% state tax on annual incomes above US$1 million. Massachusetts has levied a 4% surcharge on $1 million-plus earners since 2022. Colorado, Connecticut, Hawaii, Michigan, New York and Rhode Island are considering similar measures.

California, the epicenter of both the AI revolution and worries about thousands of jobs being made obsolete by it, recently submitted enough signatures to place a ‘billionaires’ tax’ on the November 2026 ballot. The measure would impose a one-time 5% tax on California residents with net worth of greater than $1bn, a move projected to raise US$100 billion to fund healthcare, education and food assistance. The initiative has already roiled the state and potentially national politics. California Governor, and likely 2028 Democratic presidential candidate Gavin Newsom, has opposed the measure, arguing it would hurt the state’s tech industry. Labor unions that initiated the proposal are considering a compromise to lower the proposed tax to 2%.

Universal basic income (UBI) is the flip side of the wealth tax. Dating back centuries, UBI intends to provide a modest but unconditional income to all citizens of a society to recognize the dignity and value of each person and to share the benefits of a nation’s bounty. The idea has gained new currency amidst renewed concern in recent years about displacement of workers by technology. Twitter founder Jack Dorsey gave $15 million to a group called the Mayors for a Guaranteed Income to divide into a series of UBI pilot programs. UBI pilots have been launched in recent years in cities including Stockton, California; Durham, North Carolina; and Baltimore, Maryland.

With Trump and the GOP focused on lowering taxes rather than raising them, wealth levies and UBI programs are non-starters at the federal level now. This could change. Democrats are making income inequality a key plank in their campaign for the November midterm elections. Should Democrats win back the White House and gain control of both houses of Congress in 2028 (as Biden and his party did in 2020), they would likely consider wealth-tax proposals already circulating among party leaders. The ‘Billionaires’ Income Tax’ bill proposed in September 2025, for instance, would subject individual taxpayers with assets of greater than US$1 billion or annual income of more than $100 million a year for three consecutive years to an annual tax based on the net gain of their assets (or to deduct the losses). The bill was proposed in the Senate by Finance Committee Ranking Member Ron Wyden (D-OR), a leading voice in Democratic tax policy, and co-sponsored by 20 Democratic Senators.

While UBI has less support at the federal level than wealth taxes, UBI could also gain favor in a Democrat-controlled White House, Senate and House. In October 2025, a dozen Democratic House members led by Rep. Bonnie Watson Coleman (D-NJ) introduced the Guaranteed Income Pilot Program Act, which would provide income equivalent to rent for a two-bedroom apartment for an initial test group of 20,000 Americans. Even Musk himself has become a proponent of UBI, posting on X in April that ‘Universal HIGH INCOME via checks issued by the Federal government is the best way to deal with unemployment caused by AI’.

Individual federal income-tax rates have declined in the US from 91% in 1955 (a vestige of increases to help pay for World War II) to 37% in 2025, while capital-gains taxes have held around 25% over the past decade, according to the Peterson Foundation (see below). Not coincidentally, the entrepreneur has risen in the eyes of the American public during this period, as the ’Organization Man’ archetype of the loyal cog in the paternalistic corporation gave way to the us-against-the-world mindset of the U.S. tech industry, best symbolized by the foundings of Apple and Microsoft in the mid-1970s.

Through the commercialization of the internet in the mid-1990s, to the rise of social media 20 years later, to the acceleration of generative AI with the launch of ChatGPT in 2022, technology has become ever-more central to the U.S. economy and society. Yet the widening gap between the few at the top and the rest below seems to have driven a policy tipping point. With the federal deficit at 6% of GDP, the highest in U.S. history outside of war and the covid-19 pandemic, and individual tax receipts the largest source of federal revenue at 50%, it seems a question of when, not if U.S. policymakers will have to consider raising taxes. The ultra-wealthy are an easy target as part of such an effort. At the same time, pressure to distribute more of the benefits of the tech boom to the rank-and-file who bear its brunt also seems poised to continue to rise through increased support for UBI, as well as for higher standard deductions for federal income taxes, as multiple progressive policymakers have proposed recently.

What does this mean for US-focused investors and corporates?

We do not profess to be able to predict when or by how much tax rates on wealthy Americans will rise. But we do see several downstream effects impacting US-centric companies and their owners from the increased focus on income inequality.

First, a redistributive shift in the tax system would be positive for firms that help individuals and small businesses prepare their income taxes (yes, including those who assist wealthy people in looking for ways to pay less in tax), as well as the many companies that provide services to the tax-preparation industry itself.

Second, companies and investors should be more prepared to view their actions in the U.S. through a more populist lens and to delineate the benefits of their products and services beyond the limited traditional corporate stakeholders of shareholders, customers and employees. Take data centers. In recent years, the tech firms developing the data centers powering the AI boom, led by the multi-billionaires highlighted above, believed the substantial tax revenue they planned to bring to mostly rural or suburban communities where data centers are located would be enough to win support from local citizens. With many local governments across the political spectrum working to halt data-center construction due to concerns about resource utilization and quality of life, developers must take a more holistic approach, thinking through ways to offset the centers’ electricity and water usage; expanding efforts to reduce noise and other potential environmental impacts; and partnering with impacted communities to share in the benefits of the center’s economic activity beyond just paying a tax bill.

Third, should UBI proposals gain further support at the state or federal level, it would help providers of affordable housing, an industry already under the spotlight at the federal and state level as many regions of the U.S. deal with housing affordability issues and shortages.

Whatever the outcome of these and similar debates, income inequality and policies to address it are sure to occupy a larger place in the U.S. policy landscape in years to come.

NHS Recovery and Productivity: Diagnostics are the place to start

Drawing on his experience as a Health Minister and Chair of the Health and Social Care Select Committee, GK’s strategic advisor Steve Brine argues that diagnostics are the critical but often overlooked foundation of NHS recovery, productivity and prevention.

Diagnostics rarely grab headlines in the way that waiting lists do. Yet during my time as a Health Minister, and later as Chair of the Health and Social Care Select Committee, I came to a simple conclusion – if you want to improve outcomes, reduce elective waits and modernise the NHS, they are the place to start.

The reality is that no patient can begin the right treatment until the clinicians know what is wrong. Whether it is cancer, heart disease or a musculoskeletal problem, diagnosis is the gateway through which every effective pathway runs.

Too often, however, diagnostics are viewed as a ‘supporting service’ rather than the critical infrastructure on which the entire system rests.

That is why I have been encouraged by the development of Community Diagnostic Centres (CDC’s) under the last government and continued under this administration.

The concept is straightforward but powerful; bring scans, tests and investigations closer to where people live, rather than requiring patients to navigate busy acute hospitals. It is one of the clearest examples of the much-discussed shift from hospital to community becoming more than words on a page and something that patients can see.

When I was a Minister, we spoke frequently about prevention and early intervention. Now it’s the talk of the town.

For my money, diagnostics sit at the heart of both. A CT scan, MRI scan or PET scan (Positron Emission Tomography, which is particularly important in cancer diagnosis and treatment planning) is not simply a test. It is an opportunity to identify disease earlier, provide reassurance quicker, and avoid patients deteriorating while waiting for answers.

As Select Committee Chair, I often heard evidence about the pressures facing the NHS workforce and the challenge of delivering constitutional standards. The current debate about the 18-week elective target is important, but it is worth remembering that elective recovery ultimately depends on diagnostic recovery. You cannot clear waiting lists if patients are waiting months for scans, endoscopy or reporting.

That is why diagnostics should be seen as a productivity issue as much as a clinical one. Faster access to tests means quicker clinical decisions, more efficient use of outpatient appointments and better use of operating theatres. Every delayed diagnosis creates friction elsewhere in the system and, most important of all, spikes anxiety in patients. The dreaded diagnosis ‘odyssey’.

The challenge now is ensuring that CDC’s become a permanent part of NHS infrastructure rather than simply a waiting-list initiative. That means investing not only in buildings and scanners, but also in the workforce; radiographers, radiologists etc.

If ministers are serious about restoring performance (which as we will explore further in this series of blogs I am writing for GK Strategy is only part of the story), improving cancer outcomes and delivering care closer to home, it’s hard to look past diagnostics as the place where the next chapter of NHS reform must begin.

The Warm Homes Plan and the government’s green agenda

GK’s Hugo Tuckett examines the government’s publication of its Warm Homes Plan and what it means for the government’s green agenda

January 2026 saw the publication of the government’s long-awaited Warm Homes Plan. The plan, which is backed by £15 billion of funding and was originally due for publication in 2025, represents the sum of the measures that the government believes will deliver on its commitment to lower household energy bills by £300 over the course of this parliament (2024-29). It is also one of the government’s most entrenched policies, dating back to Labour’s time in opposition when Shadow Chancellor of the Exchequer Rachel Reeves announced in 2021 that a future Labour government would deliver billions of pounds worth of new funding to support upgrades to the UK’s green infrastructure.

The Warm Homes Plan seeks to deliver a significant expansion of solar panels and heat pumps, marking a departure from previous efforts to improve the insulation of homes. Despite its original billing to improve households’ energy efficiency, the final publication of the plan sets out the energy secretary Ed Miliband’s ambition to deliver a ‘rooftop revolution’ and includes a range of measures designed to support a much greater uptake of solar panels. This has led to some concern amongst charity and industry groups who have warned that shifting to clean heat and electricity generation (including heat pumps and solar panels) before dealing with the scale of draughty homes is only going to lead to an increase in bills in the short term. It does though demonstrate the government’s shift in approach from seeking to reduce household energy consumption to increasing energy generation from renewable sources.

Ministers are eager for households to adopt a range of green measures to substantially lower bills and, in some cases, deliver ‘zero-bill’ households. The government’s thesis is that investing in the roll out of new technologies now, including heat pumps, will drive down costs further in the medium-to-long term. It also becomes much cheaper and more efficient to use a heat pump when combined with battery storage systems and solar panels. Critics will say that the government should be thinking much more radically about how it plans to rebalance the levies on energy, so that it can bring down the cost of electricity for all if it really wants to see people make the shift from gas to electricity. Aside from the government reiterating its decision to remove £150 worth of levies from energy bills through the abolition of the Energy Company Obligation (ECO), this plan does not tackle that more intractable problem.

The funding included in the plan is predominantly aimed at low-income households, but there is some financial support available to all homes. The plan will administer £4.4 billion in grants to low income households and social landlords. This will include fully funded upgrade schemes, including solar and heat pumps, depending on the assessment of the building. It will also establish a £5.3 billion Warm Homes Fund which will be available to all households. This includes £2 billion in low-and-no-interest consumer loans and £2.7 billion for innovative finance products in the home upgrade system. The government aims to upgrade five million homes by 2030 and lift one million homes out of fuel poverty through the plan, which will be overseen by a new government body, the Warm Homes Agency.

The publication of the plan is a significant moment for the government and for energy secretary Ed Miliband. Despite previous climbdowns on the amount of funding that would be made available to support the government’s green agenda, Miliband has deftly navigated both HM Treasury and the Cabinet to retain a sizeable portion of funding to deliver on his ambitions in the sector when other departments are experiencing real-terms cuts. As the 2029 general election approaches, there will be real pressure on the Department for Energy Security and Net Zero to deliver on the ambitions of the plan, which sits in an area of public policy where the government will be hoping to draw a clear dividing line with Reform UK. The government has spent a lot of its first 18 months in power talking up its efforts to boost the UK’s green credentials and lower household energy bills – now it’s all about delivery.

Risk-based or sector led? How we can expect the government to regulate AI

Elon Musk’s AI chatbot, Grok, has received significant backlash in recent weeks after its ability to create sexualised images of women and children generated widespread media headlines. The scale of the public outcry has sharpened concerns about how quickly AI capabilities are outpacing existing safeguards. This has increased pressure on the government to more stringently regulate AI, which is reshaping industries at an unprecedented pace, bringing both opportunities and risks.

Prime Minister Keir Starmer previously suggested that the government would move away from the last Conservative administration’s ‘pro-innovation regulatory framework’ for AI, as set out in its white paper on AI published in 2023. Instead, Starmer has publicly emphasised the need for an overarching regulatory framework with additional protections in specific areas. He has also expressed concerns about the potential risks and impacts of AI, while acknowledging its transformative potential for society. In January 2025, the government published its AI Opportunities Action Plan, which set out its ambitions to use AI to ‘turbocharge’ economic growth and create AI growth zones to speed up planning processes for AI infrastructure.

The government’s approach to AI differs from the EU’s risk-based framework, which classifies AI systems into four categories: unacceptable risk, high risk, limited risk, and minimal risk. Each category has a different set of regulations and requirements for organisations developing or using AI systems. UK-based organisations with operations in the EU or those deploying AI systems within the bloc are likely to fall under the jurisdiction of the EU AI Act, requiring UK organisations to keep abreast of legislative changes and any potential future misalignments between the UK and EU in this area.

Although Starmer has pledged to turn the UK into an ‘AI superpower’, ministers have so far struggled to find the right balance between regulation and harnessing AI’s economic potential. At the end of 2024, the government proposed relaxing copyright laws to allow developers to train AI models on any material they can legally access. The plans received widespread criticism from creatives and high-profile musicians who would be required to opt-out of having their work used. Ministers have since acknowledged that the move was misguided and announced that the associated legislation would be delayed while they develop a more extensive policy framework.

It is likely that we will see new legislation announced in the form of an AI and Copyright Bill at the King’s speech, which is due to take place in May 2026. This presents an opportunity for businesses to engage with the government at a key stage of the policymaking process.

The legislation is likely to focus on safety, copyright protections, and transparency. The government has been clear that it does not want to introduce measures that could drive AI investment out of the UK. Appearing before the Digital and Communications Committee in January 2026, technology secretary Liz Kendall stated that many of the larger AI companies are opposed to ‘onerous burdens’, suggesting the government is likely to adopt a cautious approach in its efforts to more stringently regulate AI to avoid deterring potential investment in the UK.

This means we can expect the government to attempt to tread a line between the EU’s risk-based framework and the deregulatory approach taken in the US in order to strike the right balance between innovation and oversight. Despite both the EU and UK focussing on principles such as accountability and transparency, the diverging approaches observed so far in practice mean a consistent approach to the regulation of AI is unlikely, at least in the near term.

If you would like to discuss AI regulation in more detail, please reach out to Annabelle Black at annabelle@gkstrategy.com.

Labour Party Conference 2025 Takeaways

As the party departs Liverpool, still clearly grappling with the challenges of what being the party of government brings, we’ve learned a lot about the direction the party is going. Here are our quick takeaways.

Keir Starmer has shored up his position…for now. With the noise going into this conference all about the leadership challenge from Manchester’s Andy Burnham, the sight of his early departure from conference before the PM’s speech will please No.10. In what could have been a perilous week for the PM, strong reaffirmation of the Chancellor’s fiscal rules, coupled with strong defences from cabinet ministers and aides, resulted in Burnham conceding that Starmer is the “right person for the job”. You can’t help but add the line “for the moment…” with other rising stars like Shabana Mahmood and Wes Streeting clearly biding their time.

Labour is taking the fight to reform. In what was probably his strongest speech as party leader, Starmer clearly set the parameters for British politics. For him, this is about Labour vs Reform. Decency vs division. Ultimately, the class-conscious speech was a deliberate attempt to win back the working class that has increasingly abandoned the party over the years to the likes of Reform. In this more combative approach, he also decried Reform’s policies on immigration as “racist”. A punchy line of attack which worked in the room, but he will hope doesn’t unravel as a perceived attack on all Reform sympathisers who are doubting the centrist parties’ ability to deliver.

The looming budget has not got any easier. In media briefings over the weekend, and in her speech, Rachel Reeves continued the manifesto commitment to not raise taxes on working people. Whilst at the same time, to appease critical voices in the Labour party, she is flirting with the idea of more spending – both on infrastructure and lifting the two-child limit. She said she is a chancellor that wants to invest. None of this sounds like a chancellor staring down the prospect of having to find £30bn in November to plug the gap predicted by the OBR.

The difference a Labour government makes. This has been the underlying strategic narrative of the conference to fend off criticism there is no difference between this government and a Conservative one. We saw speech after speech rattle off long lists of tangible activities the government has taken across the policy spectrum. We can expect much more of this narrative to come, together with a clear focus on ‘showing’ that delivery to the electorate, rather than just ‘telling‘ them.