The Budget has been branded “a bit of a gamble” by a respected economic research group.
The chancellor was able to promise more spending in his budget after forecasts for tax collection were raised, the Institute for Fiscal Studies said.
But those forecasts could easily change for the worse, leaving the chancellor in a tight spot, the IFS said.
The think tank also warned that many public services will continue to feel squeezed for some time to come.
“This is no bonanza,” said Paul Johnson, the director of the IFS.
“If I were a prison governor, a local authority chief executive or a head teacher, I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.”
Health spending is the exception, with £20bn extra funding promised to help the NHS and pay for mental health services.
Speaking to the BBC’s Today programme earlier, the Chancellor, Philip Hammond, defended his spending decisions. He said that taken as a whole, other departments would see their spending rising in line with inflation.
In her speech to the Conservative Party conference in October, Prime Minister Theresa May promised an end to austerity.
The IFS said it was not clear yet whether austerity is over. It pointed out that £4bn of cuts to welfare spending were still working their way through the system.
A judgement on austerity also depends on what is measured, according to the IFS.
While total spending, including the effect of inflation, is set to rise, spending as a fraction of national income will fall slightly.
Mr Johnson also said this Budget showed the government had abandoned its target to get rid of the gap between spending and income – the deficit – in the near future.
“Any idea that there is a serious desire to eliminate the deficit by the mid-2020s is surely for the birds.”
This chancellor is seemingly content to let the deficit float up. That would have, until relatively recently, been considered heresy round his way.
Politically, it’s a big change of priority and has allowed the government to change its rhetoric substantially.
But if you look carefully, a huge amount of that money will be gobbled up quickly by the health service. After that, by some calculations, there simply won’t be much to go around – and some departments might even still face cuts.
The chancellor bases his Budget on figures from the Office for Budget Responsibility (OBR). This year it revised up its forecasts for tax income, which was an unexpected windfall for the government.
However, the IFS warned: “Yesterday’s Budget was a bit of a gamble.
“What the OBR gives this year, it can easily take away again next year. If it does, then the chancellor will have painted himself into a bit of a corner.”
To get himself out of that corner, the chancellor would have to raise taxes, or more likely, continue to borrow money, the IFS said.
Meanwhile, spending on public health in England and doctors and nurse training is set to fall next year, according to the fine print of the Budget documents.
The chancellor announced real-terms funding increases for NHS England, which provides front line services. But the rest of the Department of Health’s day-to-day budget next year (2019-20) will fall.
The Health Foundation think tank says in real terms, there will be a reduction of £1bn, or 12%.
What else was announced?
- £400m to allow schools to “buy the little extras they need”
- A digital services tax aimed at tech giants
- Help for first-time buyers of shared ownership properties
- Another freeze in fuel duty
- A £30bn package for England’s roads, including repairs to motorways and potholes
- £900m in business rates relief for small businesses and £650m to rejuvenate High Streets
- Tighter tax rules affecting private sector contractors
- A tax on plastic packaging which does not contain enough recycled materials – but no disposable plastic cup tax
- An extra £1bn for the Ministry of Defence to boost cyber capabilities and anti-submarine warfare capacity
- A further £650m of grant funding for English local authorities to spend on social care