The Institute for Fiscal Studies said chancellor John Healey’s first budget left a £28bn shortfall in public finances unaddressed. The think tank said the choices deferred the problem to next year’s spending review, which it expects to be tough for some departments.
IFS director Helen Miller said the approach implies that some public services will face real-terms cuts. Healey delivered the budget to the Commons on Wednesday, and the IFS published its verdict the following day.
Headroom and deferred decisions
Healey kept to his fiscal rules with £15bn of headroom, drawing on the £23.6bn buffer left by predecessor Rachel Reeves. Departmental spending across the rest of the parliament was left broadly unchanged in cash terms.
The IFS said that deferral relies on spending cuts or tax rises that have not yet been announced. It called allowing a modest reduction in headroom a reasonable choice.
Miller said the spending review could bring another round of speculation about tax rises. She warned that with low headroom, the government may find itself back in that position next year.
Scale of the pressures
The IFS flagged a £17bn top-up that could be needed for 2030-31 to avoid a return to austerity for unprotected departments. Separately, an extra £11bn would be required to meet the commitment to lift defence spending to 3 percent of GDP.
Miller said cuts to other services could be delivered. She added that she was sceptical the government would be willing to do it.
Related: Healey rules out capital gains tax rise in October budget
Source: Institute for Fiscal Studies
