Chancellor Rishi Sunak will have "little room for manoeuvre" in this month's Budget and Spending Review to achieve his stated objective of a balanced budget, according to the Institute for Fiscal Studies.
To meet his fiscal goals laid out before the pandemic, Sunak will have to give some parts of the public sector less money than he had planned for before the pandemic, despite greater pressure for spending.
To keep the currently planned total in place, the Chancellor may even implement cuts to some budgets over the next two years, the independent think tank added.
Borrowing for this year is predicted to be £50 billion lower than was forecast in the March Budget, which the Chancellor is unlikely to bite into after a speech against "reckless" borrowing he made earlier this month.
Given recent announcements of tax rises, including a hike in National Insurance contributions, public spending will settle at 42% of national income, 2% above its pre-pandemic level and its highest level in ‘normal times' since 1985.
Paul Johnson, IFS director, said:
"The combined effects of ever-growing spending on the NHS and an economy smaller than projected pre-pandemic mean that he (Sunak) is still likely to be short of money to spend on many other public services.
"On central forecasts, there will be little or no scope to increase spending on things like local government, the justice system and further education, after a decade of sharp cuts."
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