Chancellor Philip Hammond gambled the public finances in yesterday's Budget, the Institute for Fiscal Studies (IFS) said today, claiming public services will still feel the squeeze despite Philip Hammond’s end of austerity claims.
The IFS said Hammond had chosen to spend his fiscal windfall rather than save it, increasing NHS spending by around £20bn until 2023-24.
The think tank’s director, Paul Johnson, said the government could have eliminated its deficit by 2023-24 but chose to spend instead, echoing the comments of the Office for Budget Responsibility (OBR).
It warned that Hammond had not taken into account the possibility that public finances could deteriorate if Britain leaves the EU with no deal or a worse than expected deal.
“When push comes to shove it’s not tax rises and it’s not the NHS that Hammond is willing to gamble on, its the public finances,” IFS director Paul Johnson said.
“Yesterday’s Budget was a bit of a gamble. Suppose the public finance forecasts deteriorate significantly next year. They might – there’s perhaps a one in three chance of that.”
If that happened Hammond would be unlikely to start austerity up again or push sizeable tax increases through parliament, Johnson claimed, and would most likely allow borrowing to “take the strain”.
Day-to-day public spending on the NHS is planned to rise by eight per cent between now and 2023-24.
But spending for departments outside of health and defence will remain largely flat, the IFS said.
The body's analysis found that total spending would rise in real terms but fall slightly as a fraction of national income.
“This is no bonanza – many public services are going to feel squeezed for some time to come,” Johnson said.
“Cuts are not about to be reversed.”