OBR to warn NHS spending pledge ups pressure for tax rises

The government’s unfunded pledge to spend more on the National Health Service has increased pressure for tax rises, the Office for Budget Responsibility will warn on Tuesday.

In its report on the public finances the government's fiscal watchdog will say Theresa May’s promise to spend billions more each year on the NHS has increased the hole in the long-term government borrowing outlook, the Financial Times reported. To avoid a sharp rise in government borrowing in the 2020s there will have to be tax increases or more public spending cuts, the OBR is expected to say.

May’s commitment to increase health spending by £20.5bn a year by 2023 will not necessarily be offset by higher taxes and the OBR will not support May’s claim that a "Brexit dividend" will help fund more spending.

The Treasury will use the OBR’s view to resist spending demands from other government departments seeking an end to eight years of cuts, the FT said. Richard Hughes, the Treasury’s head of fiscal policy, said the department would set out its plans to get a grip on spending pressures.

Paul Johnson, director of the Institute for Fiscal Studies thinktank, told the FT: "The government is close to losing the power of fiction that they’ve got control of spending."