The Resolution Foundation estimates that the Chancellor, John Healey, may have as little as £12bn of headroom against his binding fiscal rule at the Budget. That is roughly half the £24bn he had in spring.
The think tank published the estimate on 13 October. It sits at the top of the £10bn to £12bn median range in the Reuters poll of economists. Its spring figure is consistent with the £23.6bn of headroom at the March fiscal update.
It blames Middle East conflict. It says higher debt interest costs alone are likely to add around £14bn a year to borrowing in 2029-30, partly offset by higher tax receipts. A downward revision to migration could add as much as £5bn.
It wants the Chancellor to restore headroom of at least £20bn, more than the £15bn the Reuters poll expects him to target. It also says £10bn is needed to raise defence spending to 3% of national income.
According to PA, it proposes about £8bn of tax rises, including on pensioners. These include closing capital gains tax loopholes on death or leaving the UK (£4bn) and charging National Insurance on partnership income (£2bn). It also wants winter help with energy bills for households where no one earns above £24,000.
It said delaying difficult choices is "not the right approach". James Smith, its chief economist, said: "We think there'll be a pretty chunky deterioration in the public finances."