pledges

Chancellor John Healey is facing a funding gap of up to £35bn and must set out “credible” spending plans in his first Budget on 28 October, an influential think tank has warned.

The Institute for Fiscal Studies (IFS) said that if the government wants to increase defence spending to 3% of national income by 2030 and lift health spending without squeezing other departments, it will need a “top-up” of billions of pounds.

Higher inflation, caused by the Iran war, could eat into what the government hoped to spend on public services, meaning Healey will have to choose between spending cuts, tax rises, or a mixture of both, the IFS warned.

The Treasury declined to comment on “rumour and speculation”.

The IFS urged the government to ensure its spending plans are credible, as opposed to proposing unrealistic future cuts to make the Budget add up.

The government is under growing pressure to show financial markets that it has a tight grip on finances as the cost of borrowing rises.

The IFS cautioned Healey about making any spending announcements in the 28 October Budget speech he has no intention of honouring.

“A ‘steady-as-she-goes’ Budget is not an option available to the chancellor,” said IFS director Helen Miller.

“Choosing to stay the course with the inherited tax and spending plans would mean allowing inflation to blow departments’ spending plans off course.

“Simply pencilling in implicit cuts that he has no intention of delivering would make the Budget a work of fiction,” she added.

Speaking ahead of the annual International Monetary Fund meeting this week, Healey said: “The consequences of conflict in the Middle East and Europe are hitting countries worldwide, leading to higher prices at the pumps and more expensive mortgages at home.

“But Britain and our allies can face up to these challenges together.”

He said his Budget “will build on this approach with fiscal discipline helping to deliver economic resilience” and give people “breathing space”.

Miller told the BBC’s Today programme that Healey has inherited spending plans for government departments where spending growth would slow in the coming years.

“[It] already looked likely that he would have to make spending cuts just to live within those,” she said. “Now, along comes the Middle East war, inflation goes up and those spending plans look very tight indeed.”

Added to that, the chancellor has said he wants to get defence spending up to 3% of national income. Under Keir Starmer’s leadership, Healey resigned as defence secretary in June in a battle with the Treasury over military spending.

Miller said: “You put all that together, if he wanted to do all of that within current spending plans he’s looking at having to cut some other services by something like £35bn.”

The chancellor does not have to address spending totals in this Budget, and may choose to leave such decisions until future events – for example, next year’s Spring Statement or Spending Review – by which time the outlook for the economy could look very different.

But the IFS warned not addressing it would cast doubt on the credibility of the government’s plans.

Previous chancellors have relied on a similar strategy of pencilling in unrealistic future spending plans to ensure that they meet the fiscal rules on the day – only to change the plans further down the line.

Miller said Healey’s focus on fiscal discipline was a “good first start but what he needs to do is not just say he’s going to cut borrowing in coming years but actually deliver on those plans.”

The Russian and Iranian presidents met in Turkmenistan ahead of regional summit.

Russian President Vladimir Putin has told Iranian President Masoud Pezeshkian that Russia will “do everything” to help end the United States-led war on Iran, Russian news agencies reported.

The two leaders met in Turkmenistan on Thursday ahead of the summit of the Commonwealth of Independent States, a group of former Soviet nations.

“You know our position. On our part, we are ready to do everything we can to help you resolve this situation,” Interfax news agency said Putin told Pezeshkian.

“We know that Iran is making real efforts to end the conflict, which broke out through no fault of its own, no fault of Iran’s,” Putin said, according to Russian media.

Putin also noted what he called a “positive evolution” in Iran-Russia relations.

In a call on Wednesday, Putin told Pezeshkian that Moscow is prepared to mediate efforts to end the war in the Middle East, Iran’s IRNA news agency reported.

Putin and Pezeshkian also met on the sidelines of the Shanghai Cooperation Organisation summit in Kyrgyzstan last month.

Strategic partnership

The two countries, which are under heavy Western sanctions, have reinforced diplomatic and military ties.

Last year, Moscow and Tehran signed a “comprehensive strategic partnership treaty” that covers areas from trade and military cooperation to science, culture and education.

Ukraine and Western countries have accused Iran of supplying Russia with Shahed drones and short-range missiles for use in the Ukraine war. Russia has also been accused of supplying data to Iran for its attacks on US targets in the Middle East.

The meeting came as Iran-US talks stand at an apparent impasse.

US President Donald Trump said on Thursday that the US will not launch an attack on Iran before the November 3 US midterm congressional elections, saying the two countries are ‌‌holding “productive” talks about ending the ongoing war.

Diplomatic efforts to resolve Russia’s offensive in Ukraine also appear deadlocked, even as both sides intensify attacks.

Ukrainian reports of South Korean fuel exports to Russia come amid strained tensions between Seoul and Kyiv.

South Korea’s Ministry of Foreign Affairs has said the government will take legal action over illegal fuel shipments to Russia if allegations from an adviser to Ukrainian President Volodymyr Zelenskyy are confirmed.

The Foreign Ministry said on Thursday it had not confirmed whether South Korean fuel, including diesel, had been exported to Russia.

It added that exports of some products, such as diesel and jet fuel for commercial purposes, were not included in a South Korean exports control list to Russia.

On Wednesday, the South Korean presidential office dismissed a statement by Vladyslav Vlasiuk, an adviser to the Ukrainian president on sanctions policy, that 176,000 tonnes of fuel were shipped from South Korea to Russia via sanctioned tankers in July and August.

Ukraine’s top sanctions official said the alleged findings run counter to South Korea’s sanctions policy towards Russia.

“Since Russia’s invasion of Ukraine, our government has consistently implemented sanctions and export controls against Russia in close cooperation with the international community,” South Korean presidential spokesperson Kang Yu-jung said on Wednesday, according to the Yonhap news agency.

“We ask that Ukraine also refrain from distorting the relevant policies of the Republic of Korea without sufficient verification of the facts and making public remarks that can damage international trust,” she added.

Relations between South Korea and Ukraine have been strained for the past couple of weeks after Seoul accused Zelenskyy of having “unilaterally disclosed” to the United Nations General Assembly that Kyiv had transferred two North Korean prisoners of war to South Korea.

Seoul Korea demanded an official apology from Kyiv, claiming the Ukrainian president had breached a non-disclosure agreement. Kyiv said no such agreement was in place.

Pyongyang and Moscow, meanwhile, have deep ties, with the two countries having signed a mutual defence treaty in 2024. According to Ukrainian and South Korean estimates, about 14,000 to 15,000 North Korean soldiers were sent to support Russia’s war efforts against Ukraine.

North Korea and South Korea remain technically at war because the 1950–1953 Korean War ended in an armistice rather than a peace treaty.