The Institute for Fiscal Studies warns that Chancellor John Healey's upcoming budget risks becoming a "work of fiction" unless he addresses £35bn in spending pressures, according to the thinktank's influential pre-budget report.
The IFS said higher inflation driven partly by Middle East conflict has created a fiscal squeeze. The thinktank argues Healey must choose between two paths by the end of the decade: increase funding for current government spending plans or accept deep real-terms cuts across departments.
The IFS is calling for key decisions to be made now rather than delayed until next year. The organisation positions itself as Britain's leading tax and spending experts and its pre-budget analysis typically shapes public debate ahead of formal government spending announcements.
The warning reflects mounting pressure on UK public finances. The thinktank's framing suggests that without explicit commitments to cover the shortfall, the budget documents will fail to present a credible fiscal picture.