Chancellor John Healey has indicated the public should prepare for a tough Budget in two weeks' time, which may not provide Government departments with extra cash to cover pay rises for doctors and nurses.
Speaking from the International Monetary Fund (IMF) meeting in Bangkok, Thailand, Mr Healey said the British people recognised the difficult nature of public finances due to ongoing global turmoil, and expected Government departments to "manage with the budgets we've got".
Pressure ahead of October 28 Budget
Mr Healey and Prime Minister Andy Burnham face a difficult prospect ahead of the October 28 Budget. They have promised to help households and businesses with increased costs driven up by the US's war with Iran, while inflation continues to erode the Government's spending power and borrowing costs.
Asked by the BBC whether the coming fiscal statement to the Commons would be tough or austere, Mr Healey replied: "Well, it's a tough time. People can see the global economic conflicts, they know the pressure it's putting on them, they understand it's putting pressure on the Government."
Departments to manage with existing budgets
Pressed on whether departments would see budgets adjusted for inflation to help meet pay commitments to workers like nurses and doctors, the Chancellor said: "Look, I'll set out all the figures as you'd expect in two weeks' time at the Budget.
"But people recognise these times that are tough for everyone, and what they do expect of a Government is to manage with the budgets we've got, deliver the public services they need, and that's the challenge for Government."
Mr Healey added that the Prime Minister and he were "in lockstep" about spending, saying: "Where we want to do things, we have to make sure that we can pay for them within the budgets that we've got and control spending, and that's part of the discipline. That's part of the discipline that the IMF here in Bangkok this week has endorsed that they see in Britain, and perhaps want to see more from other countries too."
IMF praise and NHS impact
The IMF this week praised the UK for its steps to manage its budget deficit over the long-term, saying Britain was doing a good job at reducing this compared with other countries. The body also said the UK was weathering the impacts of the Iran War better than expected, but warned inflation from the conflict was likely to get worse before it gets better.
Mr Healey and the Prime Minister have reportedly rebuffed a request by Health Secretary Yvette Cooper for more cash to cover the costs of a pay deal for nurses, telling her to fund it out of the NHS's existing budget. This could have an impact on the delivery of frontline services within the NHS.
