RAMPANT inflation risks wiping out billions of pounds pledged for public services, experts warned today.

The Treasury would need to top up spending by more than £8 billion this year and more thereafter to compensate for the squeeze on public services dealt by sky-high inflation, according to the Institute for Fiscal Studies (IFS).

Public service budgets are set in cash terms, so do not enjoy an automatic boost from higher prices, unlike tax revenues, it said.

The government’s spending plans are now “considerably less generous” than originally intended last autumn, the think tank said.

It estimates that the average real-terms growth rate in day-to-day public service funding for the next three years has dropped from 3.3 per cent under original plans to 1.9 per cent per year.

So higher inflation is expected to wipe out a significant chunk — more than 40 per cent — of planned real-terms rises, it said.

To remedy this, the IFS estimates that the Treasury would need to top up spending plans by more than £8bn this year.

It would then need to do the same by about £18bn in each of the next two years.

The IFS warned that, without such action, estimates suggest the day-to-day military budget would end up more than 8 per cent lower in 2024-25 than in 2021-22. The think tank noted that this would “sit oddly” with Tory leadership contenders Rishi Sunak and Liz Truss’s positions on defence spending.

The IFS said estimates suggest education and Home Office spending would also barely increase over the three-year review period under current circumstances.

Association of School & College Leaders general secretary Geoff Barton said the analysis “shows very clearly the devastating impact of soaring inflation on education.”

He said: “It is very likely that this situation will result in cuts to education provision and larger class sizes as schools and colleges try to find ways to balance their budgets.”

Donna Rowe-Merriman, head of business & community at the trade union Unison, said public services and the people who run them need significantly more money in these extraordinary days.

The Treasury said the government is “taking important steps to get inflation under control.”

Plans announced in the spending review 2021 mean that total departmental spending is set to rise to £566bn in 2024-25 — a cash increase of £150bn, it said.