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11 August 2022

Higher inflation spells danger for the UK’s public services

An extra £8.3bn will now be needed to maintain current public service spending levels.

By Ben Walker

Inflation reduces the value of spending. If prices rise but budgets stay the same, those budgets lose real-terms value. According to an Institute for Fiscal Studies analysis, this is the risk facing the UK’s public services.

Previous forecasts suggested the UK’s public services needed an extra £4bn to return departmental spending to real growth in 2022-23, but the latest ones suggest those departments now require £8.3bn to cover 2022-23 spending – more than double the initial projection. Worse, for 2023-24, almost £18bn is estimated to be needed to cover public service expenditure.

This extra spending would not allow for increased service provision: it would only maintain current standards. If existing budgets were maintained, in effect ignoring inflation, there would be real-terms cuts to the NHS, schools and other key areas. 

[See also: How inflation is worse for women]

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