Economy
IFS warns UK Budget faces a £35bn gap amid inflation and defence demands
The Institute for Fiscal Studies says Chancellor John Healey may need to find about £35bn to raise defence spending, protect health budgets and avoid deeper cuts elsewhere. Inflation linked to the Middle East conflict is reducing the value of existing departmental plans, while higher borrowing costs could shrink the government’s fiscal headroom to about £20bn by 2029-30. The IFS says forecasts remain unusually uncertain and warns that postponing decisions could undermine Budget credibility.
Editorial summary · Publisher article
What matters
- Meeting the stated defence and health ambitions within current plans could require roughly £35bn of cuts elsewhere, according to the IFS.
- The IFS expects borrowing costs in 2029-30 to be about £10bn higher than previously forecast.
- The government may still meet its fiscal rules, but with a smaller estimated buffer.
- The Budget is scheduled for 28 October.
Context & caveats
- The £35bn estimate is an IFS scenario, and the official OBR forecast may differ materially.
Why this made the edition
The report provides detailed fiscal estimates, attributed analysis, policy choices and uncertainty around the UK Budget, including borrowing costs, headroom and defence spending pressures.
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