The IFS says it is funding a “dark cloud” hanging over the election campaign

A leading think tank has issued a stark warning about the financial challenges that await the next government.

The Institute for Fiscal Studies (IFS) says the state of public finances hangs over the election campaign “like a black cloud”.

He warns that further tax increases or cuts in public services may be in the future.

It calls for an “open and robust” discussion on how all parties should deal with these matters.

Both Labor and the Conservatives have committed to reducing debt as a proportion of national income. All major parties are likely to adopt a similar form of self-imposed rules in order to keep government borrowing costs from financial markets low.

But the Independent International Finance Corporation claims that higher interest payments on existing debt and lower expected economic growth could make future debt reduction more difficult for whoever is in government than in any parliament since at least the 1950s, without further measures.

To meet existing rules, the current chancellor has already set out what could amount to potential cuts in funding for some public services – such as justice or higher education – of more than 10% in the coming years, once population growth and inflation are taken into account. .

Taxes are also on track to absorb a larger share of the state’s income, rising from 36.5% in the current tax year to 37.1% in the period 2028-2029, especially with the freezing of the thresholds at which different rates of taxes are applied to income, instead of that. than rising with inflation as they have traditionally done.

As such, the IIF says that unless there is a significant improvement in growth, the next government may face three broad options: proceed with cuts in spending on services, raise taxes further, or increase annual borrowing, which could lead to To the risk of preventing total debt from declining.

“Money is tight,” said Paul Johnson, director of the Institute of International Finance. “We may be miraculously lucky to achieve growth and avoid having to make these difficult choices. But we may not.”

He added: “Just because thousands of English and Scottish football fans are crossing their fingers and hoping for the best this summer, doesn’t mean the next government should do the same.”

He added that the next government should not wait for it to come to power until it “opens the books,” adding that they are published and available for everyone to view.

“We must use it as a basis for an open and robust debate during the election campaign,” he added.

The IFS warning is similar to one it issued after the Budget in March, when it spoke of a “conspiracy of silence” that meant the major parties failed to acknowledge potential challenges, or explain how they would be dealt with.

All parties will put forward policies they say will make voters better off in the coming weeks.

But with most economists coming to a similar conclusion as the Institute of International Finance, such pledges will be made against a backdrop of constrained public finances – which could mean difficult choices ahead that could ultimately affect voters’ fortunes.

Responding to the IFS findings, Darren Jones, shadow chief secretary to the Treasury, said Labor was under no illusions about the scale of the challenge it would face.

“The country will only see the full scale of the challenge if we win the elections,” he said. “We promised an immediate injection of money into our public services and we will then work to change the course of the country.”

The BBC has also contacted the Conservatives for comment.