Budget  

Hammond accused of 'gamble' in Budget

Hammond accused of 'gamble' in Budget

Chancellor of the Exchequer Philip Hammond was accused of taking "a bit of a gamble" with Britain's public finances in his Budget yesterday.

Paul Johnson, the director of the Institute for Fiscal Studies, said Mr Hammond had taken a risk in spending so much of the windfall he received from the improving state of the UK's public finances.

According to forecasts provided for yesterday's Budget by the Office for Budget Responsibility (OBR), borrowing this year is set to be £12bn less than forecast in March and next year, after the measures announced yesterday, it is forecast to be £2bn less.

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The improved public finances allowed Mr Hammond to spend money, including £20bn of additional spending on the NHS, without increasing taxes.

Mr Johnson said: "Yesterday’s Budget was a bit of a gamble. Yes the OBR reduced borrowing forecasts so he was able to find more money without committing to more borrowing. But what the OBR gives the OBR can take away.

"Suppose the public finance forecasts deteriorate significantly next year. They might. There’s perhaps a one in three chance of that. What will he do then? It’s hard to see austerity starting up again with promised spending increases not materialising.

"The chances of getting sizeable tax rises though parliament are next to nil. It’s surely borrowing that would take the strain. Fair enough. That’s a judgment. But it’s a judgment that could see debt ratchet upwards."

Mr Johnson also questioned Mr Hammond's claim, made several times during yesterday's Budget speech, that the era of austerity was coming to an end.

While he acknowledged there was a big upward revision to overall spending plans, with spending on the NHS rising substantially, many other areas would continue to see spending cuts.

Mr Johnson said: "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."

He added that Mr Hammond's changes to the income tax bands, with the personal allowance rising to £12,500 and the higher rate threshold to £50,000, would benefit the better-off.

Mr Johnson explained that the changes would benefit more than 30 million people by an average of around £44 a year, with the typical higher rate taxpayer gaining £176 and the typical basic rate taxpayer gaining £24.

damian.fantato@ft.com