The price spike caused by the US-Israel war in Iran poses a major challenge for Chancellor John Healey as he puts together his first Budget, an influential think tank has warned.<\/p>\n
Higher-than-expected inflation could eat into what the government hoped to spend on public services, meaning Healey will have to choose between spending cuts, tax rises, or a mixture of both, the Institute for Fiscal Studies (IFS) said.<\/p>\n
It urged the government to ensure its spending plans are credible, as opposed to proposing unrealistic future cuts to make the Budget add up. <\/p>\n
The Treasury declined to comment on “rumour and speculation”. <\/p>\n
However, speaking ahead of the annual International Monetary Fund meeting this week, Healey said: “The consequences of conflict in the Middle East and Europe are hitting countries worldwide, leading to higher prices at the pumps and more expensive mortgages at home.<\/p>\n
“But Britain and our allies\u202fcan face up to these challenges together.”<\/p>\n
He said his Budget “will build on this approach with fiscal discipline helping to deliver economic resilience” and give people “breathing space”.<\/p>\n
However, the government is under growing pressure to show financial markets that it has a tight grip on finances as the cost of borrowing rises.<\/p>\n
The IFS cautioned Healey about making any spending announcements in the 28 October Budget speech he has no intention of honouring.<\/p>\n
“A ‘steady-as-she-goes’ Budget is not an option available to the chancellor,” said IFS director Helen Miller said.<\/p>\n
“Choosing to stay the course with the inherited tax and spending plans would mean allowing inflation to blow departments’ spending plans off course.<\/p>\n
“Simply pencilling in implicit cuts that he has no intention of delivering would make the Budget a work of fiction,” she added.<\/p>\n
The US-Israel war against Iran and Russia’s invasion of Ukraine have together helped drive up energy prices around the world.<\/p>\n
These higher costs have been passed to customers via higher prices on shelves and at the pumps. <\/p>\n
The wars have also contributed to a rise in the cost of UK government debt interest payments, adding to the pressure on Healey.<\/p>\n
Although higher inflation will boost tax revenues, it will also eat into the value of departments’ cash budgets, the IFS said.<\/p>\n","protected":false},"excerpt":{"rendered":"The price spike caused by the US-Israel war in Iran poses a major challenge for Chancellor John Healey…\n","protected":false},"author":2,"featured_media":799656,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[59,57,58,50,56,54,55],"class_list":["post-799655","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-kingdom","tag-gb","tag-great-britain","tag-greatbritain","tag-news","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/799655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=799655"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/799655\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/799656"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=799655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=799655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=799655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}