Is the Chancellor’s spending plan credible?

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The economic outlook has worsened since the spring. Inflation is expected to be higher for longer, borrowing costs have risen, and the conflict in the Middle East has added fresh uncertainty for households, businesses and the public finances.

In this episode of IFS Zooms In, we examine what this means for the Chancellor’s first Budget. While the Office for Budget Responsibility may still forecast that the fiscal rules will be met, the underlying spending plans look increasingly difficult to deliver.

With departmental budgets set in cash terms, higher inflation erodes their real value. Combined with pressure to increase defence spending and protect the NHS, this could leave other public services facing deep cuts - or require the Chancellor to make difficult choices on tax, benefits or borrowing.

IFS researchers João Sousa and Bee Boileau explain why “headroom” against the fiscal rules is only part of the story, why credible spending plans matter, and what the Chancellor needs to set out ahead of next year’s Spending Review.

This episode draws on new IFS research published as part of the 2026 Green Budget. The 2026 edition of the IFS Green Budget is funded by the Nuffield Foundation, Barclays and the Economic and Social Research Council (ESRC) through the Centre for Microeconomic Analysis of Public Policy (CPP).