Higher-than-expected inflation could eat into what the government hoped to spend on public services. The think tank urged ministers to make their spending plans credible. Healey delivers the Budget speech on 28 October.
The Treasury declined to comment on "rumour and speculation." Speaking ahead of this week's annual International Monetary Fund meeting, Healey said conflict in the Middle East and Europe is hitting countries worldwide, "leading to higher prices at the pumps and more expensive mortgages at home." His Budget, he said, would use fiscal discipline to deliver economic resilience and give people "breathing space."
IFS director Helen Miller said a "steady-as-she-goes" Budget is not an option. Inherited tax and spending plans would let inflation blow departments' budgets off course. Financial markets add pressure, because the cost of borrowing is rising and the government needs to show it has a tight grip on finances. The Iran war and Russia's invasion of Ukraine together have pushed up energy prices around the world, and those costs have reached customers through higher prices on shelves.
Miller was blunt about the alternative. Pencilling in cuts he never plans to deliver would make the Budget "a work of fiction."