The Institute for Fiscal Studies delivered its verdict on the Healey budget spending review prospects one day after the chancellor's debut tax and spending statement to the Commons. In that assessment it said Healey had ducked several big decisions, leaving plans for overall departmental spending across the rest of the parliament broadly unchanged in cash terms.

What the budget did

In his first budget as chancellor on Wednesday, Healey raised taxes on banks and landlords to fund relief for households squeezed by the energy shock from the Middle East war. The low-key speech was designed with febrile bond markets in mind, as the conflict drives up UK borrowing costs.

• •Healey stuck to the government's fiscal rules with £15bn of headroom, allowing a hit to the £23.6bn buffer left by his predecessor Rachel Reeves.
• •The IFS said it was a "reasonable choice" for the chancellor to allow a modest reduction in headroom, given grim forecasts for household living standards and growth.

Why the IFS still sees a 'brutal' spending review

The same assessment warned the budget has paved the way for a "brutal" spending review next year because it failed to cover a £28bn shortfall in the public finances needed to avoid a return to austerity. IFS director Helen Miller said avoiding austerity for unprotected departments could require a £17bn top-up to spending plans for 2030-31.

• •A further £11bn would be needed to fund the commitment to increase defence spending to 3% of GDP, before that £17bn top-up is counted.
• •The war in the Middle East is fueling a surge in inflation that raises the cost of delivering public services, meaning large cuts are in effect pencilled in ahead of the next general election.

Doubts the cuts will happen

"It effectively implies that some public services will see real-terms cuts in next year's spending review," Miller said. She added that her concern was not impossibility - "that could be done" - but scepticism that this government would be willing to deliver the implied cuts.

The IFS also criticised the plans for meeting the fiscal rules, saying they in effect relied on cutting public spending or announcing tax increases the public had not been prepared for. Pointing to the small remaining buffer and the departmental squeeze ahead, Miller warned of another round of damaging speculation about tax rises once the spending review lands next year.

With Labour having promised no return to austerity, the IFS said it appeared extremely unlikely Healey would follow through with such cuts, with the spending review due next year.