IFS: budget will be ‘work of fiction’ without clear plan to cover UK spending pressures
Summary
Britain’s Institute for Fiscal Studies (IFS) warned Chancellor John Healey that his upcoming budget could be unrealistic unless he clearly explains how to cover £35 billion in extra government costs. The IFS says higher inflation and war-related financial pressures mean the government must either add more money or face cuts in public services by 2030.Key Facts
- The IFS says Healey’s budget risks being a “work of fiction” without a clear plan for £35 billion in extra spending.
- Rising inflation, partly caused by the Middle East conflict, has increased government borrowing costs.
- The Chancellor must either increase funds for public services or plan real-term spending cuts by 2029-30.
- The government’s current buffer for unforeseen costs could be cut by about half due to market reactions to the war.
- Higher inflation could increase tax revenue but also reduces the value of government spending power.
- The IFS urges Healey to avoid delaying tough decisions until next year’s spending review.
- Bank of England Governor Andrew Bailey has said fiscal policy must be credible to financial markets.
- Ignoring these spending pressures risks making Labour’s budget plans seem unrealistic or dishonest.
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