Front-Loading Fiscal Illusion
Spend heavily now, promise implausible cuts later — a structural pattern in UK fiscal planning
A repeating pattern in UK budget-making — identified by both Johnson and IFS predecessors — is that governments commit to large near-term spending increases that are politically popular, while projecting implausibly small spending growth (or outright cuts) in years 3-5 of the forecast to make the fiscal arithmetic balance. Because those future years are beyond the horizon of current accountability, the implausible projections never get tested before the next election.
The 2024 Budget followed this pattern exactly. Rachel Reeves committed to significant real spending increases in 2024-25 and 2025-26 — particularly for health, local government, and justice — but then projected just 1.3% annual real growth thereafter. Paul Johnson noted this is a 'very small number' once you factor in ring-fenced commitments for health and defence growing above that average, implying cuts or freezes for everything else. Cabinet ministers are unlikely to accept those cuts when the time comes, which means either more tax rises or borrowing.
The fuel duty freeze is the clearest multi-year illustration: for 15 consecutive years, chancellors have included planned inflation-matching rises in their baseline to make the numbers work, then frozen the rate anyway. The 'saving' never materialises, but the next chancellor inherits a baseline that assumes it will. Front-loading creates a fiscal ratchet: near-term commitments become entrenched, far-term savings remain fictional.
- Governments have strong incentives to concentrate popular spending near-term and model implausible savings at the edge of the forecast horizon.
- When a new chancellor inherits a fiscal crisis, look first at what the previous chancellor projected for years 3-5 — those are likely the phantom savings.
- Ring-fenced departments (health, defence) growing above the headline rate mechanically require cuts elsewhere that are rarely stated explicitly.
- The 1.3% real spending growth figure only balances if politically unfeasible departmental cuts materialise after the next election.
- Fuel duty freeze is the canonical example: 15 years of deferred rises that still appear in every baseline as planned revenue.
- Identify the near-term spending commitmentsNote the concrete departmental allocations for year 1 and year 2 — these are real, politically committed, and unlikely to be reversed.
- Find the out-year headline growth rateLocate the total spending envelope growth for years 3-5 in the OBR forecast. In 2024, this was 1.3% real annually — the number that must do the heavy fiscal lifting.Pro tipThis figure is usually buried in the OBR fiscal annex tables rather than the Chancellor's speech.
- Identify ring-fenced above-average commitmentsList departments with explicit commitments to grow faster than the headline rate (health, defence, schools). These are implicit commitments that mechanically reduce the growth available to the rest.Pro tipSubtract ring-fenced department shares from the headline envelope and recalculate implied growth for unprotected departments — this is where the cuts are hiding.WarningIf the implied growth for unprotected departments is negative in real terms, those cuts are unlikely to survive cabinet.
- Apply the political survivability testAsk: which of the projected out-year cuts would require a cabinet minister to publicly accept a real reduction in their department's budget? If the answer is 'most of them', the projection will not survive contact with political reality.
- Estimate the resulting funding gapQuantify the difference between the projected spending path and the path consistent with politically sustainable department allocations. This gap is the most likely source of the next budget's tax rises or borrowing.Pro tipThis is the structural forecast: not what will happen, but what will need to happen if political economy holds.
Jeremy Hunt's 2023 budgets projected tight out-year spending to meet fiscal rules — projections the IFS and OBR flagged as implausible given political economy. Reeves inherited the gap as a 'black hole' and used it to justify large tax rises. Her own budget then projects 1.3% real spending growth in years 3-5 — which the IFS immediately flagged as likely implausible for the same structural reasons.
Since 2011, each chancellor has assumed inflation-matching fuel duty rises in the baseline (creating apparent revenue) then frozen the rate (losing that revenue) while calling it a 'cost' of the freeze. Reeves did the same in 2024 despite £40bn of tax rises and low petrol prices.
Reeves gave local government and the justice system above-average increases in 2024-25 and 2025-26, addressing genuine crises. But after those two years, the 1.3% envelope, once health and defence take their share, implies these departments face the same pressure again.
Paul Johnson drew the explicit parallel between Reeves' 2024 plan and Jeremy Hunt's 2023 spending projections — where future implausible cuts created the very 'fiscal black hole' that Reeves then inherited and spent Budget week dramatising. Johnson's IFS has documented this pattern across multiple governments, making it a structural observation rather than a partisan critique. Barrett reinforced the political logic: front-loading creates the perception of improvement within the parliament's lifespan, which is the only horizon politicians are accountable to.