Cuts to public spending are not about to be reversed despite Philip Hammond’s claim austerity is over, a leading economics think-tank has said.
In its analysis of the Budget, the Institute for Fiscal Studies (IFS) said there were “more difficult years ahead” and warned the chancellor was taking a “gamble” with the public finances.
Paul Johnson, the director of the IFS, said on Tuesday that despite some giveaways from Hammond the Budget was “no bonanza” for voters.
“Many public services are going to feel squeezed for some time to come,” he said. “Cuts are not about to be reversed.”
He added: “If I were a prison governor, a local authority chief executive or a headteacher I would struggle to find much to celebrate.”
Addressing the government’s claim the Budget meant austerity was now over, the IFS concluded: “On a narrow definition perhaps it does, on wider definitions it doesn’t, at least not yet.”
Hammond used Monday’s Budget to announce a £100bn loosening of the purse-strings.
The chancellor gave income tax breaks to 32 million voters, injected money into the beleaguered Universal Credit benefits system and promised increased public spending over the coming years.
Theresa May this morning denied the moves signalled she was preparing to call another snap election.
The chancellor declared in his Budget that public spending would increase by 1.2%.
But the vast majority of that will be the £20.5bn boost for the NHS – leaving other departments would only see their budgets rise in line with inflation – 0.0% increase.
And the IFS said despite the extra cash for the health service, there was “nothing particularly historic” about the announcement.
The think-tank said Hammond would be thanking his “lucky stars” that improved public finance forecasts had allowed him room to hand out the money.
“Yesterday’s Budget was a bit of a gamble,” the IFS said. “Suppose the public finance forecasts deteriorate significantly next year. They might.”
The IFS said if they did, Hammond would be unlikely to be able to fill the hole with tax rises or new cuts and would have to increase borrowing.
“Any idea that there is a serious desire to eliminate the deficit by the mid
2020s is surely for the birds,” it concluded.
John McDonnell also risked igniting an internal Labour row this morning when he declared he would support Hammond’s income tax cuts – despite the changes benefiting the rich the most.