The Institute for Fiscal Studies has told Chancellor John Healey that his upcoming budget risks becoming a "work of fiction" unless he addresses £35bn in spending pressures facing the government.
The thinktank, which wields significant influence in pre-budget discussions, says Healey must decide now how to cover the shortfall rather than defer decisions to next year. The IFS identifies higher inflation as the core problem. That inflation has eroded the real value of government spending plans, leaving Healey with two options by the end of the decade: inject additional funds into current spending plans or accept deep real-terms cuts across departments.
The IFS report arrives as Middle East conflict adds pressure to public finances. The thinktank's warning signals that without explicit fiscal choices outlined in the budget, departmental spending commitments will exist on paper only, lacking the cash allocation needed to fulfil them.
The analysis frames the budget as a pivotal moment. Postponing hard choices means the scale of the gap will compound, making eventual cuts sharper or requiring larger new spending allocations. By urging action now, the IFS is flagging that incremental adjustments will not close a £35bn hole.
Healey faces a choice between politically costly cuts to public services or tax rises and spending increases that could conflict with the Labour government's stated commitment to fiscal discipline. The IFS report amounts to pressure from the fiscal establishment to make that choice explicit and immediate rather than leaving it implicit in a budget that appears balanced on paper but cannot be delivered in practice.