Good morning.

On Tuesday, Keir Starmer confirmed that the government will increase defence spending to 2.5% of GDP by 2027, with plans to raise it further to 3% during the next parliament. The announcement marks the biggest increase in defence spending since the end of the cold war, but the even bigger surprise came with the announcement that the additional funding would come directly from the overseas aid budget, which will fall from 0.5% to 0.3% of GDP – a cut of around £6bn.

The Institute for Fiscal Studies has estimated that the rise in defence spending would amount to £5.3bn, less than half of the governments own figure of £13.4bn, which appears to be inflated. (For more on that read defence and security editor Dan Sabbagh’s comprehensive analysis.)

Starmer acknowledged the increase in defence spending could only be financed through “extremely difficult and painful choices”, adding that the aid cut was “not an announcement I am happy to make”. This latest reduction, which follows a cut under Boris Johnson, comes two days before Starmer’s meeting with Donald Trump – and could be seen as a move to smooth relations with the president who has long accused Nato allies of not contributing enough in terms of defence spending.

Critics have drawn direct comparisons to the Elon Musk-led dismantling of USAid, which handles a $40bn budget. Only two weeks ago, the foreign secretary, David Lammy, warned in the Guardian that Trump’s slashing of aid could be a “big strategic mistake” that leaves space for China to expand its global influence. Yet the UK government now appears to be following Washington’s lead. Lammy followed up last night by stating that the shift is a necessary one, adding that Labour “are a government of pragmatists not ideologues”.

Today’s newsletter explores the latest budget decisions and their potential global impact. That’s right after the headlines.

Five big stories

1. Ukraine | Donald Trump has said that Volodymyr Zelenskyy is likely to visit the White House on Friday to sign a rare earth minerals deal worth $500bn to pay for US military aid.

2. Gaza | Israel is seeking to extend the first stage of the ceasefire agreement in the war with Hamas in Gaza and is prepared to resume fighting if there is no progress in crucial talks this week, according to reports.

3. Health | Wes Streeting will axe thousands of jobs at NHS England after his ousting of its chair and chief executive in what health service staff fear is a power grab. The health secretary’s plan follows Amanda Pritchard’s shock announcement on Monday that she was stepping down as the organisation’s chief executive next month. She will be replaced, for the foreseeable future, by Sir Jim Mackey.

4. Education | British universities have been warned to “stress-test” all assessments after new research revealed “almost all” undergraduates are using generative artificial intelligence in their studies. A survey of 1,000 students – both domestic and international – found there had been an “explosive increase” in the use of genAI in the past 12 months. 88% said they used tools such as ChatGPT for their assessments, up from 53% last year.

5. BBC | The BBC has admitted that it “fell short and failed people” by not dealing with “bullying and misogynistic” behaviour by its former Radio 1 DJ Tim Westwood. A major external inquiry found it “missed opportunities” that could have led to action. The inquiry was triggered by a 2022 Guardian-BBC News joint investigation into allegations of sexual misconduct and predatory behaviour by the DJ.

In depth: ‘Shortsighted and appalling’ or ‘strong step from an enduring partner’?