Research published by the Institute for Fiscal Studies (IFS) ahead of the Spring Budget due on 23 March, claims that Chancellor Rishi Sunak will have to make the decision to ‘significantly increase spending and public borrowing’ or ‘cut public spending even further’ and face the worst drop in living standards for nearly half a century.

The research shows that if UK public sector workers are to avoid a ‘painful pay squeeze to their finances in the year ahead’ he will have to find an extra £10bn to spend on the public sector if the change in inflation outlook was fully factored in.

This cost would be across the 5.7m workforce and equivalent to £1,750 per worker.

The IFS states that inflation, which is set to peak above 7% in April, according to the Office for Budget Responsibility (OBR) has risen enough to wipe out a quarter of the ‘real-term increases’ that were planned.

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