Britain’s next government will need to fill a shortfall of up to £33bn in the public finances unless it is prepared to push through a fresh round of severe austerity measures, a thinktank has warned.

The Resolution Foundation said the debate between Labour and the Conservatives over the funding of specific pledges was “detached from reality”, with election promises based on cuts that would be hard to deliver.

The thinktank said both the main parties were committed to reducing debt as a share of national income within five years but higher interest payments on debts, slower-than-expected productivity growth and the £10bn cost of compensation for the infected blood scandal would make that more difficult.

The Office for Budget Responsibility, the Treasury’s tax and spending watchdog, has estimated that the government is on course to meet its debt-to-GDP target with just £9bn to spare, but the Resolution Foundation said the winning party in the general election would face the choice of raising taxes or cutting spending to meet its debt target.

The thinktank said if the next government stuck to current spending plans the size of the deficit was likely to be about £12bn, but if it chose to spare prisons, the police and local government from fresh cuts, it could be as big as £33bn. In its annual health check on the UK economy last month, the International Monetary Fund warned of a £30bn post-election hole.

James Smith, the Resolution Foundation’s research director, said: “The state of the public finances has dominated the election campaign so far, with the inevitable arguments over how each spending pledge is funded. But this narrow focus risks distracting the electorate from the bigger question of how each party would manage the uncertainties facing the public finances.

“This question is crucial, as whoever wins the election could be confronting a fiscal hole of £12bn, if today’s uncertainties turn into bad news after the election. And if the next government wants to avoid a fresh round of austerity, that black hole could rise to over £33bn.”

The budgets for NHS England, education, defence and the Foreign, Commonwealth and Development Office are ringfenced, but this would result in inflation-adjusted, per-person spending cuts to unprotected departments – such as justice, the Home Office and local government – of 13% between 2024-25 and 2028-29. Cuts on this scale – equivalent to £19bn – would amount to repeating nearly three-quarters of the cuts made during the 2010-2015 parliament.

“Delivering these cuts in the face of already crumbling public services and the public desire for more, not less, spending on public services would likely prove very challenging,” the Resolution Foundation said.

While the stated aim of both parties was to get debt falling, the next government could be on course to miss this target by more than £30bn. History and politics had left the fiscal debate “detached from this reality”, it added.

Debt-based lending via revenue-based financing has been a tough model in recent years, as margins became tighter for companies due to fears of recession, higher inflation hitting consumer spending, and increased interest rates.

“Overall, the private debt market is growing tremendously, faster than most if not all alternative asset classes, so the opportunity generally is huge,” Paul Becker, CEO and cofounder of Re:cap, told Business Insider. “Looking at the hype in the startup world, which started roughly three years ago, things have changed a bit. Today, you can see that some players were just jumping on a trend, whereas we took things very seriously from day one.”

Re:cap told BI its focus on data will help it avoid similar issues to its competition.

Re:cap has brought in funding from Entree Capital, alongside existing investors Felix Capital and Project A. Becker told Business Insider that his existing investors wanted to lead the funding round, given the wider market for fintech funding, which has been arduous and could be overly time-consuming.

According to Atomico, funding for European startups dropped by 45% year-on-year to $45 billion in 2023, but investment in European fintech dropped well below the wider slump. According to Finch Capital, funding for fintech startups declined 70% to $5 billion in the first half of 2023 from $17.1 billion compared with the same time in 2022.

“Of course, going out for fundraising has its advantages, but in this case, the upside of keeping the group of investors as it is, having a fast process, and focusing on building the business was better,” Becker added.

The funding will double the company’s team to around 80 employees by the end of 2025. The company will also expand its SaaS product, which offers cash flow management tools to funds such as Channel Capital and Avellina Capital.

Check out Re:cap’s pitch deck below:

A family financial plan can steer your family toward financial success, helping you achieve your life goals and minimizing the sacrifices you need to make to reach them. But developing a financial plan can be complex, since you have so many factors to consider. On top of that, you’ll need to revise your plan over time, as your family’s needs and your life circumstances change.

“Building a family financial plan is an important step towards achieving your financial goals and ensuring the well-being of your family’s finances,” says Jordan Mangaliman, CEO of Goldline Financial Services in Fullerton, California.

Here’s how to create a family financial plan and what to watch out for.

How to build a family financial plan

A good financial plan helps your family effectively use its sources of income and balance those against current needs while anticipating future needs. The plan should help your family reach its short-term goals while preparing you to achieve your long-term goals as well.

1. Start with your family’s goals

The family financial plan begins with your goals, so you’ll want to understand what those are:

• Do you want to retire early and only take on projects that you find compelling?
• Do you want to simply build wealth for the future?
• Do you want to fund a good life for your spouse and children?
• Do you want to buy a dream house?

Whatever your goal, you need to identify it before you can start working toward it. Your financial plan is then structured around your goal and when you want to achieve it.

We all perceive financial success a little differently, and this can impact the goals you set for yourself. A recent Bankrate survey asked Americans to define what financial success looks like to them.

Most people valued comfort above all else at 56 percent, followed by being financially prepared for the future at 44 percent. Never worrying about money and living debt-free tied at 41 percent.

Others define success as having enough money to quit working, becoming a millionaire or owning a business. However you picture your “I’ve finally made it” moment, you’ll need a strong financial plan to make your vision a reality.

2. Build a budget to reach those goals

The “meat and potatoes” of a family financial plan is knowing your sources of income and your expenses. Among Americans who don’t consider themselves financially successful, 26 percent say they need to stick to a budget in order to achieve their goals, according to a recent Bankrate survey.

A good monthly budget will help you balance your near-term spending priorities and ensure that you’re saving some cash for the future, too. A budget is the base from which good financial decisions are made.

An effective budget helps you prioritize spending, so you’re not caught off-guard by upcoming expenses. It ensures that your wants don’t eclipse your needs and that you have money available when you do need it. A budget also helps you to avoid going into debt – at least unplanned debt – which can make your financial goals even more difficult to achieve.

The budget factors in your regular income and spending. That can help you prioritize which areas to focus on. You can track your spending to see what your typical spending patterns are and where your money goes each month. Then you can cut back on spending in certain areas in order to hit your financial goals.

As new priorities emerge – retirement savings, funding a child’s education, buying a home – you’ll need to adjust your budget to factor them in, or risk racking up high-cost debt. The budget becomes the place where you financially reconcile these competing priorities into a plan.

Here’s how to make a monthly budget and some resources for organizing it. You could also try a zero-based budget model to ensure every dollar has a purpose and is put toward saving, investing or essentials.

3. Build that emergency fund

It can be easy to overlook an emergency fund, especially if it’s tough to balance your income and spending. But the emergency fund is a great way to protect yourself and keep moving toward your long-term goals, because it can help you avoid having to take drastic measures.

“Establishing an emergency fund helps your family pay for unexpected expenses like a medical emergency or car repair,” says Mangaliman. “Aim to save at least six months’ worth of living expenses in a liquid and easily accessible account.”

The emergency fund should be a line item in your budget at least until you have that money saved up. This money is protection for you and your family’s financial goals, helping to ensure that some short short-term issue doesn’t derail your long-term plans.

Now is a great time to set up a high-yield savings account for your emergency fund.

4. Invest for the future

It can be easy to let your near-term expenses crowd out investing for the future, but you’ll want to be sure that you’re building for your financial future, too:

• Retirement accounts: It can be easy to overlook these accounts, especially when you’re young, but don’t do it. Time is your biggest ally in retirement saving, so even starting small is important. Many employers offer a retirement plan such as a 401(k) or 403(b) that has various tax advantages, and many will offer you matching money if you contribute to it. In addition, everyone with earned income has access to an IRA, which allows you to invest on a tax-advantaged basis, too.
• 529 accounts: If you have children or plan on having them, then you’ll want to consider how to pay for their college education, and a 529 plan can help you do that. It lets you invest on a tax-advantaged basis to pay for education expenses and even student loans.
• Taxable accounts: Beyond just specialized accounts, you can also put money away in general taxable accounts such as a brokerage account. The best brokerage accounts let you invest in potential high-return assets such as stocks and stock funds, and many also offer an attractive return on your cash, too.

Factor your investments in the future into your budget, so the money will be there when you need it. Investing for the future is one of the most difficult parts of the financial planning process, so it’s a great time to call in an expert to help you build this part of your plan.

5. Protect yourself with insurance

Life insurance is another element that can help your family keep moving toward its financial goals even in the event of a family member’s passing. Like the emergency fund, life insurance helps you avoid having to take drastic measures such as assuming high-cost debt.

Life insurance “is an important requirement when there are dependents, including children or a spouse,” says Stuart Boxenbaum, CFP, president, Statewide Financial Group in Jupiter, Florida.

But many families may slip up when it comes to getting enough coverage.

“The simple rule is to have the breadwinner’s total income multiplied by a minimum five years, or up to 10, for the death benefit,” says Boxenbaum. “If earnings are $100,000 a year, the minimum death benefit should be $500,000, [or it] could be up to $1 million.”

6. Revise your plan

It can be easy to make a plan and then not follow up as your life changes. And it will change. You’ll achieve some of your goals, children will be born and other people will pass out of your life. And those changes mean that you need to adjust your family’s financial plan in response.

“When you accomplish your goals on time or even ahead of time like paying off debt, you can repurpose that cash flow towards your next financial objective,” says Mangaliman. “Parents may also need to downsize their living situation when their kids are no longer living in their home, thus updating the family’s financial plan.”

“However, unforeseen circumstances like critical health events or a decrease in pay can delay reaching certain objectives, and a family financial plan should be updated accordingly,” he says.

“Conducting an annual or semi-annual review is important,” says Boxenbaum.

Even if the result of that regular review is just “no changes,” the review will keep you thinking about your financial plan and how it might need to be adjusted over time.

Where family financial plans go wrong

Crafting a family financial plan is not easy because you have so many different variables to consider. Here are some common places where you could trip up:

• Lack of flexibility: Your financial plan should have some flexibility built in, especially around the budget. So build in room for expenses that could exceed the norm, such as winter heating bills or the unexpected repair. Saving too much never ends up being a problem, and it’s better to err in this direction than spending too much.
• Not reviewing the plan regularly: Reviewing your plan regularly ensures that you’re working with the most up-to-date numbers, both for your income and expenses. It also allows you to adjust your budget to changes such as a new child and that child’s future education expenses, for example.
• Not calling in an expert when needed: Building an adequate financial plan can be complex. “The best place to start is by calling in a financial advisor that works with families and individuals to help you do calculations,” says Boxenbaum. “A professional advisor likely does these types of cases frequently.”
• Maintaining high-cost debt: High-cost debt can really crimp your lifestyle, and it can get worse over time if you don’t handle it. “Keeping credit card balances and other debts can feel like the norm, but it doesn’t have to be,” says Mangaliman. “Being intentional about paying off high-interest debt accelerates your family’s financial success.”
• Not reviewing insurance: Your insurance needs can change over time, as your life changes. Review your coverage to be sure that you have what you need as well as that you’re not paying for coverage that you don’t need.
• Listening to unqualified advisors: Social media is full of unqualified people offering advice. Be very careful who you take advice from, and understand the best practices.

Creating a financial plan can be overwhelming, but you can call in pros to help you get it done.

“Financial planners can give you support and personalized guidance on how to most efficiently reach your family’s financial goals,” says Mangaliman. “It’s important to seek a financial professional who can help you with a custom overall strategy instead of pitching a single product or service.”

Bankrate’s financial advisor matching tool can help you identify advisors who can help you build a financial plan for your family.

Bottom line

Building a financial plan can be a lot of work, but it can help you and your family reach your financial goals. But start with your family’s budget and work outward from there, calling in experts where you need them to help you make smart decisions and stay on track.