A "dividend" resulting from the UK reaching a Brexit deal with the EU will provide a boost for next year’s Spending Review chancellor Philip Hammond has said
In the Budget statement the chancellor signalled austerity was “coming to an end”, and said the government would deliver a “double deal dividend" if an agreement was reached with the EU: a boost from the end of uncertainty; and a boost from releasing some of the fiscal headroom I am holding in reserve”.
Setting out both the projection for government spending ahead of next year's Spending Review, he said that departmental revenue spending would grow at an average of 1.2% per year in real terms between 2019-20 and 2023-24 - compared to average growth of -3% after the 2010 review, and -1.3% after the 2015 round.
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Full departmental spending allocations would be set out next year, Hammond said, but he also announced a series of funding increases brought forward to deal with services pressures. The government will provide £600m extra for social care in 2019-20, while departments are also set to receive a share of a £500m top-up to funding he announced in last year’s budget to help government departments to prepare for Brexit in 2019-20. The chief secretary to the Treasury, Liz Truss, will set out the departmental allocations of the £2bn total soon, Hammond said.
Hammond also announced a funding boost for Universal Credit, with £1bn over five years to ease the transition of benefit claimants from the legacy benefits system to the new system. Esther McVey, the work and pensions secretary, will set out further details when she announces managed migration legislation later this year, he said.
“The switch to Universal Credit is a long-overdue and necessary reform,” Hammond said. He said the additional funds addressed the genuine concerns” MPs had raised and promised: “Universal Credit is here to stay.”
He also announced an increase to work allowances that he said would cost an annual £1.7bn once the Universal Credit rollout is complete. The move would benefit 2.4m working families with children and people with disabilities, he said.
The chancellor has been under mounting pressure in recent months to boost funds for the flagship welfare reform, over concerns it is pushing welfare claimants into financial hardship and doubts about the Department for Work and Pensions’ ability to deliver the managed migration process.
The Ministry of Defence also received a funding boost, with Hammond announcing £1bn to increase cyber capability, anti-submarine warfare capacity and to maintain the pace of the Dreadnought nuclear deterrent submarine programme.
Hammond also announced a £400m "in-year bonus to help our schools buy the little extras they need". The one-off capital payment would average £10,000 per primary school and £50,000 per secondary school, he said.
Counter terrorism policing will receive a £160m boost, and Hammond confirmed that £2bn of the £20bn-a-year boost to the NHS, announced in June, would go to beefing up mental health services.
Hammond made no mention of public sector pay in the speech. Last week it was reported that he might use the Budget to tie public sector pay rises to performance and geographical location, bringing an end to across the board pay rises.