IFS says Hammond's budget is gambling with public finances

Philip Hammond has taken a “gamble” on the future health of the public finances by using better short-term borrowing figures to raise spending on the NHS, according to Britain’s leading tax and spending thintank.

The Institute for Fiscal Studies warned that the public finances could deteriorate next year, at a time when Britain leaves the EU, which could pose difficult questions for the government after the chancellor increased spending on the health service.

It said there was possibly a one in three chance that the public finances would deteriorate significantly next year, adding that the judgment to increase spending could push the national debt higher.

Paul Johnson, the director of the IFS, 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.”

He added that it was “for the birds” that the government would be able to eliminate the budget deficit by the mid-2020s, while adding: “One might question the chancellor’s claim to be take a ‘balanced’ approach.”

Despite the increase in funding for the health service, the IFS warned that the budget did not represent an end to austerity. “Many public services are going to feel squeezed for some time to come. Cuts are not about to be reversed,” he said.

The Resolution Foundation also released its analysis of the budget, saying that income tax cuts for millions of workers will “overwhelmingly benefit richer households”, with almost half set to go to the top 10% of households.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

The analysis by the thinktank (pdf) found that welfare cuts would continue to affect the poorest households, despite Hammond’s announcement that austerity was coming to an end.

Three-quarters of the £12bn in welfare cuts announced after the 2015 election remain government policy.

The overall package of tax and benefit changes announced since 2015 will deliver an average gain of £390 for the richest fifth of households in 2023-24, the thinktank found, compared with an average loss of £400 for the poorest fifth.


Leave a Reply