Philip Hammond will allow the government’s spending deficit to rise next year as he seeks to pay for the first round of extra NHS spending and a series of measures that will “bring an end to the era of austerity”.

The chancellor sanctioned a rise from 1.2% to 1.4% in the annual deficit between this year and 2019/20 as he sought to honour promises made by the prime minister to boost spending on health, local authority housing and a freeze on fuel duty.

Over the next five years, Hammond has authorised £30bn of extra spending and tax cuts that he might have kept aside for a rainy day, according to the Treasury’s independent forecaster, the Office for Budget Responsibility (OBR).

Much of this extra spending came in the form of Hammond’s commitment to public services, which were promised an extra 1.2% a year starting in 2020/21, and follow a 3% a year cut between 2010 and 2015, and 1.3% a year squeeze since then.

The extra spending cheered Tory backbenchers, keen to see the end of eight years of spending cuts, but undermined Hammond’s attempt to cast himself as a fiscal conservative who has saved the gains from a stronger jobs market and higher tax receipts to protect against a no-deal Brexit.

In a swipe at the chancellor’s decision to spend much of the extra funds forecast for the exchequer over the next five years, the OBR said he was in danger of missing one of his two rules.

Robert Chote, the chairman of the OBR, said: “If he had sat on his hands and done nothing, [the chancellor] would have reached his long-term objective of balancing the budget by 2025, which is in the legislation and is something he must do. But looking at the outlook now, it doesn’t look like he is on track to make that target.”

Chote said the public finances had performed better so far this year than the OBR and outside forecasters expected back in March, even though the economy has grown less quickly.

Forecast GDP growth increased from the 1.3% predicted in March for this year to 1.6%, while in 2019-20 and 2020-21 it is projected to hit 1.4%. In 2021-22, growth is expected to be 1.5%, and 1.6% in 2022-23.

The OBR’s forecasts predict that most of the gain for the Treasury will come from a trend in the labour market towards full-time jobs, bringing higher wages and tax receipts.

Chote said the OBR was more pessimistic about the likelihood of big improvements in productivity going forward than the Bank of England. So while wages are expected to improve more than it forecast in March, the OBR said bumper wage rises over the next few years were still unlikely.

Torsten Bell, the director of the Resolution Foundation thinktank, said the cumulative effect ran over five years, but spending this would still leave the chancellor unable to end austerity.

“The chancellor has set out plans to spend almost all of a very significant fiscal windfall on extra spending for the NHS, bringing to a close the era of falling overall public service spending. But unprotected departments are still on course for spending cuts into the 2020s, averaging 3% between 2019 and 2023.”

Hammond said he would meet his second rule, which is to bring down the total debt-to-GDP ratio from 85%. He told MPs that it would fall in every of the next five years, to reach 74.1% in the 2023/24 financial year.

The ratings agency Moody’s, which recently downgraded Italy following its budget battle with the EU, joined in the criticism of Hammond for spending some of the gains from an improving economy. A spokeswoman, Sarah Carlson, said: “Today’s budget confirms our expectation that we won’t see a material reversal in the UK’s high public debt levels for some time and that elevated debt levels will continue to be a credit challenge for the UK for the foreseeable future.

“Social and political pressure to increase spending will remain high, while the ongoing Brexit negotiations present a high level of uncertainty over the economic outlook.”

Dan Burke, a public sector analyst at the accountants PwC, said Whitehall chiefs would be pleased by the spending plans put forward by the chancellor, but he was only able to provide a sketchy outline of spending plans ahead of a full review next year.

“Public service leaders will be pleased to receive extra short-term cash to cover major pressures in areas such as social care, universal credit, roads, housing and defence. But all the big decisions will have to wait until next year’s spending review,” he said. “The end to austerity in public spending will depend on a Brexit ‘deal dividend’ that the chancellor hopes we will be enjoying by next spring.”

Day-to-day government spending is already in surplus

The government will be borrowing to fund public spending long after the end of the current parliament following a spending spree that will ease welfare cuts and push health spending up by £20.5bn by 2022/23.

Borrowing this year will be £11.6bn lower than forecast at the spring statement, following bumper tax receipts and lower than expected Whitehall spending. The annual deficit will fall to 1.2% of GDP, but will rise as a proportion of GDP to 1.4% in 2019/20 and stay above 1% until 2022/23, when it will slip down to 0.9% and 0.8% in 2023/24.

Strip out public investment spending on road, rail and other infrastructure projects and the deficit on public spending becomes a surplus. This illustrates a shift to investment spending by Hammond and how much the government has driven down costs in areas such as public sector pay and welfare over recent years.

The definition used for day-to-day government spending – the cyclically adjusted current budget deficit – shows it is already in surplus and will continue to be for the next five years.