Philip Hammond has revealed that the government will undertake a full review of departmental funding next year after the publication of the overall spending envelope later this year.
In the first ever Spring Statement, which has replaced the Budget after the major fiscal event was moved to the autumn, the chancellor also announced he would set out departmental allocations from the £1.5bn available for departments to prepare for Brexit. The Home Office topping the list with an allocation of £395m, followed by £310m for the Department for Environment, Food and Rural Affairs and £260m for HM Revenue and Customs.
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In a statement to the House of Commons, the chancellor said that he would use the Budget in the autumn to set out the total public spending envelope for years beyond 2020. Then a full departmental Spending Review in 2019 will set out the departmental allocations across government.
"That is how responsible people budget," he said. "First you work out what you can afford. Then you decide what your priorities are. And then you allocate between them."
Hammond said that if the public finances continue to improve, he may then be in a position to begin increasing funding for public services.
"And if, in the Autumn, the public finances continue to reflect the improvements that today’s report hints at then, in accordance with our balanced approach, and using the flexibility provided by the fiscal rules. I would have capacity to enable further increases in public spending and investment in the years ahead. While continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted."
The comment comes after the Office for Budget Responsibility lowered its borrowing forecast for the current financial year to £45.2bn, £4.7bn less than forecast in the November Budget. Borrowing is then expected to fall to £37.1bn in 2018-19, £33.9bn in 2019-20 and £28.7bn in 2020-21.