Philip Hammond has taken a "gamble" with the UK economy which could lead to higher borrowing and debt in coming years, the Institute for Fiscal Studies has warned.
In its reaction to Monday’s Budget, the respected think tank also cast doubt on his claim austerity for the public sector is “coming to an end”, pointing out that despite the £20bn increase in spending on the NHS by 2023, other departments were still facing serious cuts over coming years.
It said 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 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.
“Total day-to-day spending on public services is planned to rise by about 8 per cent between now and 2023-24, but spending outside of protected areas is essentially flat – and indeed ticks up next year before falling a bit. It falls on a per capita basis,” said Mr Johnson.
“Does that add up to the end of austerity? On a narrow definition perhaps it does, on wider definitions it doesn’t, at least not yet.”
He added: “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 headteacher I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.”
The IFS also pointed out that the NHS’s increased real terms funding of 3.4 per cent a year was still lower than the service has typically had since its foundation in the 1940s.
“Despite its favoured status, there is nothing particularly historic about these announcements,” said Mr Johnson.
The Resolution Foundation think tank, separately, stressed that despite the increase in the generosity of Universal Credit announced by Mr Hammond on Monday, which reversed some of the cuts imposed by his predecessor George Osborne, three quarters of the total welfare cuts pencilled in since 2015 were still official government policy.
And the think tank also calculated that 84 per cent of the cash benefit of the Chancellor’s income tax cuts will go to the top half of the income distribution next year, and by the end of the parliament almost half will go to the top ten per cent of households alone.
“While yesterday’s Budget represented a seismic shift in the government’s approach to the public finances, it spelt an easing rather than an end to austerity – particularly for low and middle income families,” said the Resolution Foundation’s director Torsten Bell.
Press Association contributed to this report
