Chancellor has taken ‘a gamble’ with public finances – thinktank

Philip Hammond has taken a “gamble” with the public finances which could lead to higher borrowing and debt in coming years, a respected economic thinktank has said.

The Institute for Fiscal Studies said that the Chancellor may have “painted himself into a corner” by using a windfall from revised borrowing forecasts to fund increased spending on the NHS.

And it warned that tax rises are “all but inevitable” in the longer run to pay for the pressure on the NHS of Britain’s ageing population.

Any expectation that Mr Hammond will now meet his target of eliminating the deficit by the mid-2020s was “for the birds”, said IFS director Paul Johnson.

Despite Mr Hammond’s claims that the economy has “turned a corner” on the way to the end of austerity, Mr Johnson said that Monday’s Budget was “no bonanza” for public services other than the NHS.

While the health service in England is set to enjoy £20.5 billion higher spending by 2023-24, spending on most other departments will be “essentially flat” over the coming five years once inflation is taken into account, said Mr Johnson.

On a narrow definition, Mr Hammond’s package could be seen as an “end to austerity, said Mr Johnson.

But he added: “On wider definitions, it doesn’t, at least not yet.”

Looking at the impact of the package on the public sector, he said: “This is no bonanza. Many public services are going to feel squeezed for some time to come. Cuts are not about to be reversed.

“If I were a prison governor, a local authority chief executive or a head teacher, I would struggle to find much to celebrate.”

Mr Johnson said that the rise in income tax thresholds announced by Mr Hammond would benefit the wealthy more than those less well-off, with a typical higher rate taxpayer gaining £176 a year and a basic rate payer gaining just £24.

And he said that, even after the injection of around £2bn a year into Universal Credit, there would be “millions of losers” from the new benefit.

“Now we know,” Mr Johnson said. “When push comes to shove, it’s not tax rises and it’s not the NHS that Mr Hammond is willing to gamble on, it’s the public finances.

“Because yesterday’s Budget was a bit of a gamble. ● ●