The UK government could face a major funding challenge by the end of the decade if Chancellor Rachel Reeves’ ambitious efficiency plans do not deliver, according to the Institute for Fiscal Studies (IFS).
Reeves is counting on government departments achieving efficiency savings of at least 5% by 2028-29. These savings are expected to come from improving public service delivery and reducing costs, with the aim of boosting productivity by 2.3%. However, this would be a record achievement—far beyond what has been managed in recent history.
Between the late 1990s and the Covid-19 pandemic, the cost of public services tended to rise rather than fall. The IFS warns that if productivity remains flat, Reeves could be forced to find an extra £18bn by 2028-29 just to maintain current service levels.
“This isn’t the first government to promise efficiency gains,” said Olly Harvey-Rich, research economist at the IFS. “But past promises often failed to materialise.”
Unlike her predecessors, Reeves faces even greater urgency. The government has pledged to improve services without raising taxes or breaking fiscal rules, leaving productivity growth as the only viable path.
The government’s targets imply annual productivity gains of 1% in staffing and equipment up to 2028-29. That would be more than four times faster than the long-term average of 0.2% between 1997 and 2019, and well above the 0.7% seen during the austerity years.
One part of the plan with precedent is a £2bn reduction in administrative spending, requiring almost all departments to cut 10% in real terms by 2028-29. Larger cuts were imposed during the coalition government from 2010, but the IFS cautions that applying uniform savings could harm frontline services if reductions in areas like IT or procurement go too far.
The challenge for Reeves is clear: without unprecedented productivity growth, she may soon face tough choices between spending, services, and fiscal discipline.
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