The Institute for Fiscal Studies (IFS) has warned that the upcoming budget will be a "work of fiction" unless Chancellor John Healey provides a clear plan to meet about £35 billion of spending pressures facing the government.
In its influential pre-budget report, the thinktank — comprising leading tax and public spending experts — said the hit to public finances from higher inflation, now compounded by instability in the Middle East, means current spending commitments are not sustainable without further measures. The IFS urged ministers to make decisive choices now rather than postpone them until next year.
Choices facing the chancellor
The IFS set out two stark options for the Treasury: either find additional funding to top up current government plans, or enact substantial real-terms cuts to public spending by the end of the decade. The report said the alternative — leaving the gap unaddressed — would render published plans unrealistic and misleading.
The thinktank’s intervention adds pressure on the government as it prepares its fiscal statement. By highlighting the scale of the gap and the potential consequences of inaction, the IFS sought to frame the budget as a moment for clarity on priorities and trade-offs rather than a catalogue of uncosted commitments.
The report comes amid broader concerns about the impact of global events on the UK economy. While it does not prescribe specific policy measures, the IFS called for transparency about the assumptions underpinning spending plans and for ministers to set out how they intend to reconcile competing demands on the public finances.
Any decision on whether to raise revenue, reallocate existing funds or cut services will have implications across government departments and for public services. The IFS said delaying those decisions increases the risk of abrupt adjustments later, which could be more disruptive for households and public provision.