Healey's budget leaves £28bn gap

Chancellor John Healey's budget fails to cover a twenty eight billion pound shortfall in public finances needed to avoid returning to austerity, the Institute for Fiscal Studies warns.

Spending plans unchanged in cash terms

Healey left departmental spending broadly unchanged in cash terms across the rest of parliament, but rising inflation from the Middle East conflict means this effectively pencils in large cuts.

Real-terms cuts likely next year

Helen Miller, director of the IFS, said avoiding austerity for unprotected departments could require a seventeen billion pound top-up for twenty thirty thirty-one, plus eleven billion for defence spending at three percent of GDP.

“It effectively implies that some public services will see real-terms cuts in next year's spending review.”

Brutal spending review ahead

Miller warned next year's spending review will look brutal for some departments, creating risk of damaging speculation about tax rises as the government faces low headroom and deferred decisions.

“A clear short-term risk with the chancellor's choices is that next year, with low headroom and a spending review that looks pretty brutal for some departments, we see another season of damaging speculation about tax rises.”

Government unlikely to follow through

Miller said it appears extremely unlikely that Healey will deliver the implied cuts to public services, given Labour's promise of no return to austerity and the approach of the next general election.

“My concern is not that it would be impossible to deliver the implied cuts to other services, that could be done. But I'm sceptical that this government would be willing to do it.”