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Philip Hammond will find himself stuck in “a corner” if Brexit goes badly after he announced a spending splurge in his set-piece Budget, a think tank has warned.

The Institute for Fiscal Studies said the Chancellor had taken “a gamble” by splashing better-than-expected tax takes on the NHS, roads and the armed forces, among other things.

It said Mr Hammond will have to choose between a return to austerity, big tax rises or greater borrowing if Brexit deals a blow to the British economy.

The Chancellor declared to the Commons that austerity was “finally coming to an end” as he pumped much of a £78bn fiscal windfall into a multitude of giveaways at the Budget yesterday.

According to the IFS, Mr Hammond got “lucky” with improved tax takes despite sluggish growth, and decided to splash the cash rather than use it to pay down the deficit.

At a post-Budget briefing today, IFS director Paul Johnson warned that there were “huge amounts of uncertainty” in the improved financial forecasts, “not least given Brexit”.

“What the Office for Budget Responsiblity gives this year it can quite easily take away next year,” he explained.

“If forecast borrowing goes up I think the Chancellor has painted himself into a bit of a corner.

“He is going to struggle to impose austerity having announced its end – but could he resort to sizeable tax rises given his lack of majority? I doubt it. More likely he’ll allow borrowing to persist at a higher level.”

He added: “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.”

Related: Chancellor says no deal Brexit will damage UK GDP for years to come

Mr Hammond had said at the weekend that failure to secure a Brexit deal could force him to change his spending plans – but he was slapped down by No 10.

The IFS said it was unable to determine whether austerity had actually ended – as Theresa May claimed in her party conference speech earlier this month – since overall spend was up but some departments are still set for cuts.

It added that some £4bn in welfare cuts were yet to come into force – despite the Chancellor handing extra cash to the under-fire Universal Credit system yesterday.

And it said Mr Hammond could have paid down the deficit by 2023, as promised in the Tory manifesto, if he had banked the extra windfall instead of spent it.

“Any idea that there is a serious desire to eliminate the deficit by the mid-2020s is surely for the birds,” Mr Johnson said.


Responding to the IFS, Chief Secretary to the Treasury Liz Truss said: “This Budget showed how the hard work of the British people is paying off, with our balanced approach providing a solid economic recovery which means austerity is coming to an end.”

She said the Government was “providing more support to public services” and “investing for the long-term” but was “also clear that discipline remains”.

Labour leader Jeremy Corbyn had blasted what he branded the “broken promise Budget” as he insisted austerity was still going strong.

It came after another think tank – the Resolution Foundation – said tax changes in the Budget handed a big boost to the richest members of society.

Source: Politics Home

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