IFS says UK public services may need £35bn by 2030-31

what happened

ShareCast reports that the IFS think tank, in a report released on Monday before the Autumn Budget, warned Chancellor John Healey of difficult decisions ahead. Spending growth is slowing sharply, while departments are dealing with higher pay bills, inflation and ambitious productivity goals.

The IFS calculated that lifting defence spending to 3% of GDP, increasing health budgets by 2.7% a year in real terms and protecting other areas from cuts could require an extra £20bn in 2030-31. Once “plausible” public-sector pay and productivity pressures are included, that illustrative requirement rises to £35bn.

Day-to-day departmental spending is expected to grow 2.4% in real terms this year, but average annual growth could fall to just 1% between 2028-29 and 2030-31. The report said public-sector pay pressures may add £7bn-£9bn to departmental costs by 2028-29, while delivering only half of the planned productivity gains would produce another £9bn shortfall. The IFS said extra spending was not unavoidable, but keeping current budgets intact would mean harder choices on public services, departmental priorities and efficiency measures.

why it matters

The estimate highlights potential pressure on the UK’s fiscal position and government bonds, as ministers weigh extra funding against service reductions and efficiency measures.

instruments