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Healey warned of 35bn budget gap to meet defence and health pledges

The Institute for Fiscal Studies said higher inflation linked to the Iran war could reduce the amount available for public services, forcing tradeoffs between spending cuts and tax rises ahead of the 28 October Budget.

Reported · Written up by our desk · Economy

The Institute for Fiscal Studies warned that UK Chancellor John Healey faces a potential 35bn pound financing gap to avoid cuts to public spending while meeting defence promises in his first Budget.

According to BBC Business, the IFS said plans to raise defence spending to 3% of national income by 2030, while increasing health spending without squeezing other departments, would require a top-up of billions of pounds.

The think tank also pointed to higher inflation, which it linked to the Iran war, saying it could erode what the government had hoped to spend on public services.

With the cost of borrowing rising, BBC Business reported that the government is under pressure to demonstrate tighter control of public finances, and the IFS said Healey must set out credible spending plans ahead of the 28 October Budget.

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