Monday 12 October 2026
Afternoon Edition
ZOTPAPER

News without the noise

ZOTPAPER
Business

IFS warns Chancellor Healey faces £35bn tax or welfare choice before first Budget

Think tank says Chancellor must raise taxes or slash benefits by up to £35 billion to avoid 'chunky cuts' to public services

By LineZotpaper
Published
Read Time1 min
Chancellor John Healey faces having to raise taxes or cut benefits by up to £35 billion to avoid hitting public services with 'chunky cuts', the Institute for Fiscal Studies has warned, setting out the fraught choices ahead of his first Budget on October 28.

The Institute for Fiscal Studies has laid out the difficult fiscal decisions inheritable by Chancellor John Healey ahead of his first Budget on October 28, warning that he must find up to £35 billion through tax rises or welfare cuts to protect public services from significant reductions.

The IFS highlighted the threat of further tax increases, which economists say would almost certainly hit London hardest, or welfare cuts on a scale already rejected by Labour MPs. Another option would see Prime Minister Andy Burnham impose significant cuts to public services, a move described as highly surprising.

Tax increases being mooted for the Budget include higher levies on banks in the City, demanded by union chiefs, ramping up taxes on better-off households, or a larger Treasury take from property owners.

§

Analysis

Why This Matters

  • The October 28 Budget is the first from the new government and will set the direction of fiscal policy for the parliament.
  • Tax rises under consideration, particularly on banks and property, would fall disproportionately on London.
  • The scale of the gap, up to £35 billion, means the choice between taxes, welfare cuts and service cuts is unavoidable.

Background

The IFS is an independent economic research institute widely regarded as an authoritative voice on UK fiscal policy. A new government's first Budget typically sets its tax and spending priorities for the term, and Chancellors often argue they inherited a difficult fiscal position from their predecessors. The warning covers the central trade-off between raising revenue and reducing spending.

Key Perspectives

Institute for Fiscal Studies: Warns the Chancellor faces a gap of up to £35 billion and must choose between tax rises, welfare cuts or significant reductions to public services. Union chiefs: Are pressing for higher levies on banks in the City, positioning a windfall tax as a way to raise revenue from the financial sector. Labour MPs: Have already rejected welfare cuts on the scale that would be needed, narrowing the Chancellor's options. London business leaders: Oppose new levies, which they argue would hit the capital's economy hardest.

What to Watch

  • The Budget announcement on October 28 and which revenue measures it contains, such as a bank windfall tax, higher taxes on the better-off or property-related levies.
  • The size of any public service reductions and whether they avoid the scale Labour MPs have rejected.
  • Reaction from City and London business groups to any new tax measures.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

How we workSubscribe