Rachel Reeves will have to find an extra £20billion a year if Britain is to hit a proposed new Nato target of spending 3pc of GDP on defence.

The Chancellor would have to raise income tax rates by 2p or slash spending equivalent to the entire Energy Department’s budget for a year.

Ministers have so far refused to set out when they will even meet Labour’s pre-election promise to increase spending on the military to 2.5pc.

The current Nato target of 2pc was set a decade ago after the Russian annexation of Crimea in 2014, although a quarter of its 32 member states are still falling to meet the requirement.

Yet leaders could now discuss increasing it to 3pc when they meet in The Hague next summer in response to the election of US president-elect Donald Trump.