The Institute for Fiscal Studies has warned that Philip Hammond will need £19 billion from higher taxes, extra borrowing or faster-than-expected growth to end austerity.
The UK’s leading experts on the public finances said that Theresa May’s promises to end austerity were “unlikely” to match up with Hammond’s vows to balance the books.
Paul Johnson, the director of the IFS, said:
“He could end austerity, as the prime minister has suggested. But even a limited definition of what that might mean would imply spending £19 billion a year more than currently planned by the end of the parliament. An increase of that size is highly unlikely to be compatible with his desire to get the deficit down towards zero.”
“Alternatively, the chancellor could stick to his guns on the deficit and leave many public services to struggle under the strain of a decade and more of cuts. He could reconcile these demands by raising taxes, and in principle there are plenty of good options, but the overall tax burden is already high by UK historical standards and he could be constrained by the lack of a parliamentary majority. This is going to be the toughest of circles to square.”
John McDonnell, Labour’s shadow chancellor, said: “This heaps yet more pressure on Hammond to explain how he is going to deliver on the Tory promise of ending austerity.”
“With billions of cuts in the form of Universal Credit still to come, and public services at breaking point, tinkering around the edges is not enough. It’s time the chancellor finally came clean about where the additional funding for the NHS is coming from.”
A Treasury spokesperson said: “Our balanced approach is getting debt falling and supporting our vital public services, while keeping taxes as low as possible. This year, we have already committed an extra £20.5 billion a year to the NHS, scrapped the public sector pay cap, and frozen fuel duty for the ninth year in a row.”