Iran War Threatens Healey's Budget Plans, Think Tank Warns
BBC News
Skip to content
Accessibility Help
Your account
Home
News (including: Climate, World, UK, Business, Tech, Science)
Entertainment & Arts
Health
In Pictures
More
BBC Verify
Newsbeat
Business
New Tech Economy
Technology of Business
Artificial Intelligence
Africa Business
Paths to Success
Healey Faces £35bn Funding Gap for Spending Plans
Chancellor John Healey is facing a £35bn funding gap and must set out "credible" spending plans in his first Budget on 28 October, according to the Institute for Fiscal Studies (IFS).
The IFS stated that if the government aims to increase defence spending to 3% of national income by 2030 and lift health spending without squeezing other departments, it will require a "top-up" of billions of pounds.
Inflation's Impact on Spending
Higher inflation, driven by the Iran war, could erode what the government intended to allocate for public services, compelling Healey to opt for:
- Spending cuts
- Tax increases
- A mixture of both
The Treasury declined to comment on "rumour and speculation".
IFS's Advice to Healey
The IFS urged the government to ensure its spending plans are credible, as opposed to proposing unattainable future cuts to make the Budget feasible.
They also cautioned Healey against making any pre-Budgett announcements he has no intention of fulfilling:
"A 'steady-as-she-goes' Budget is not an option available to the chancellor." - Helen Miller, IFS Director
"... simply pencilling in implicit cuts that he has no intention of delivering would make the Budget a work of fiction." - Helen Miller
Healey's Response
Healey expressed his commitment to tackling global challenges alongside allies:
"The consequences of conflict... are hitting countries worldwide, leading to higher prices..."
He further stated that his Budget will promote fiscal discipline, deliver economic resilience, and provide "breathing space" for people.
Notes on Spending Plans
While Healey doesn't need to address spending totals in this Budget, he may choose to postpone such decisions until future events alter the economic outlook. However, the IFS cautioned that not addressing inflation-related gaps would cast doubt on the government's plans.
Historically, chancellors have relied on pencilling in unrealistic future spending plans, only to adjust them later.