(Bloomberg) -- Britain’s fast-growing population is ramping up pressure on Chancellor Jeremy Hunt’s spending plans, requiring a £25 billion ($31.7 billion) top-up to stop fresh cuts to some public services, according to new research.

The Institute for Fiscal Studies warned that higher-than-expected migration will further reduce the generosity of departmental budgets in the coming years and urged Hunt not to press ahead with tax cuts in his March 6 Budget. 

The analysis raises the prospect of a further squeeze for services such as local government, further education, courts and prisons, areas that bore the brunt of austerity following the 2008-09 global financial crisis. Hunt is reportedly considering more spending restraint next week in order to fund tax cuts being demanded by grassroots Conservatives to salvage their political fortunes before a general election expected this year.

Last month, the Office for National Statistics said the population is set to grow twice as fast by 2030 as previously thought, with the number of people living in the UK projected to exceed 70 million by mid-2026 and reach almost 74 million by 2036. That both boosts tax revenue and increases demand for public services such as schools and health care.

“New long-term population projections driven mostly by higher expected net migration help increase the size of the economy but will make existing spending plans even more challenging in per-capita terms,” the IFS report said. “Despite this there is the possibility that the spending plans will be cut back further in the Budget in order to pay for new tax cuts.”

Real day-to-day spending on public services was expected to grow by 0.5% a year in per-capita terms from 2025-26 at the time of the Autumn Statement in November. However, taking into account the faster population growth now expected, this falls to just 0.2% a year, the IFS said.

This leads to a 4% a year slump in per-person spending on so-called unprotected departments, as other budgets such as health and defense are prioritized. A £20 billion top-up in 2028-29 is required to stop unprotected spending falling, and £25 billion to safeguard per-capita spending.

“It is quite possible that whoever is in office after the general election will either be unwilling or unable to deliver this and end up topping up various spending plans,” said Carl Emmerson, deputy director of the IFS.

The IFS urged Hunt to spell out where cuts will fall if he decides to curtail future spending plans to make headroom to reduce the tax burden, which is on track to hit the highest level since World War II. The economic case for tax cuts before the next Spending Review is “weak,” with the public finances still in a poor state.

The think tank predicted the the budget deficit in the current fiscal year is now on course to be £113 billion, some £11 billion lower than the Office for Budget Responsibility forecast in November.

However, while lower interest rates and inflation are bringing down the cost of servicing the national debt, interest payments will continue to be a drag on the public finances and are expected to settle at £55 billion a year, or 2% of national income, the IFS said. 

Large increases in the amount of gilts investors will need to absorb, partly the result of the BOE selling back the bonds it bought during more than a decade of quantitative easing, make the outlook for interest costs “extremely uncertain,” it added. 

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