By Islam El-Sakka
Chancellor John Healey has backed away from cutting welfare costs during this parliament, even as the Institute for Fiscal Studies warned of a £28bn shortfall in public finances that could force brutal departmental spending cuts.
IFS warns of tight spending plans
The IFS said Healey’s budget left a mountain to climb by ducking major tax and spending decisions. Director Helen Miller said public service spending plans look extremely tight and could lead to another season of damaging speculation about tax rises.
Welfare bill timeline clarified
Healey initially suggested the benefits bill would fall before the next election, but Treasury officials later clarified no timetable has been set. The chancellor pointed to upcoming reviews by Alan Milburn on youth employment support and Stephen Timms on disability benefits, which may recommend upfront spending to reduce long-term costs.
Cost of living measures and bank tax
The budget included a £100 winter cost of living payment for most households. Critics, including the Resolution Foundation, said support is spread too thinly ahead of expected energy bill rises. The chancellor doubled the bank profit surcharge from 3% to 6% for 15 months, though the TUC argued banks could pay more.
Fiscal headroom reduced
Healey left a £15bn buffer against Labour’s fiscal rules, down from £24bn at the spring statement. The IFS cautioned that higher energy costs could easily erode this headroom, leaving the chancellor more exposed to future shocks.
