UK public services could need £35bn spending boost by 2030-31, warns IFS

(Sharecast News) - The UK government could need to increase public service spending by £35bn a year by 2030-31 to meet its defence and health ambitions while protecting other departmental budgets from cuts, according to the Institute for Fiscal Studies (IFS). In a report published on Monday ahead of the Autumn Budget, the think tank warned that Chancellor John Healey faces difficult choices as spending growth slows sharply and departments grapple with rising pay costs, inflation and ambitious productivity targets.

The IFS estimated that increasing defence spending to 3% of GDP, raising health budgets by 2.7% annually in real terms and avoiding cuts elsewhere could require an additional £20bn in 2030-31.

Accounting for what it deemed "plausible" public sector pay and productivity pressures could push that illustrative figure to £35bn.

Day-to-day departmental spending is forecast to rise by 2.4% in real terms this year, but growth is expected to average just 1% annually between 2028-29 and 2030-31.

The report warned that public sector pay pressures could add £7bn-£9bn to departmental costs by 2028-29, while achieving only half of planned productivity improvements would create a further £9bn shortfall.

The IFS stressed that additional spending was not inevitable, but said maintaining existing budgets would require tougher choices over public service provision, departmental priorities and efficiency improvements.