The surprise announcement that Chancellor Sajid Javid will set out Whitehall spending budgets next week has fuelled speculation that the Government is preparing for an early election.
The spending round statement on September 4 will deliver extra funding for “people’s priorities” including schools, hospitals and the police, Mr Javid said.
But Labour dismissed the announcement as a “pre-election stunt” and claimed the Government was in a state of panic.
Writing in the Daily Telegraph, Mr Javid said: “Thanks to the hard work of the British people over the last decade, we can afford to spend more on the people’s priorities – without breaking the rules around what the Government should spend – and we’ll do that in a few key areas like schools, hospitals and police.
“But at the same time, it’s vital that we continue to live within our means as a country.”
It was “important that we don’t let our public finances get out of control”, he added, promising to stick to the fiscal rules set by predecessor Philip Hammond.
Mr Javid asked for a 12-month spending round instead of a longer-term exercise as a way of “clearing the decks to allow us to focus on Brexit”.
A full multi-year spending review will be carried out in 2020.
The decision to announce the spending plans for 2020/21 on September 4 has heightened speculation that Prime Minister Boris Johnson is preparing for an early election.
This could either be called by him or it could be a sign the Tories are preparing for the prospect of MPs across the Commons opposed to Mr Johnson’s Brexit plans seeking to bring down the Government through a vote of no confidence.
By promising increased spending on schools and hospitals now, Mr Johnson would hope to counter some of the attacks Labour will make on the Tory record during an election campaign.
Shadow chancellor John McDonnell said: “Nobody is fooled into believing that this is a proper and normal spending review.
“It’s a one off pre-election panic-driven stunt budget.
“As each spending announcement is dribbled out it is exposed as inadequate and whole areas of spending needs like local councils and addressing child poverty are ignored. This is not serious government.”
Mr Javid had been due to give his first major speech as Chancellor on Wednesday but this was called off on Tuesday because of the spending round announcement next week.
The Chancellor said the review would “give Whitehall departments certainty over their budgets for next year, and will confirm our plans to fund the nation’s priorities”.
Until October 31 there will be “a relentless focus across Whitehall on preparing to leave the EU”, he said.
“As the Prime Minister has said, the best outcome for us would be to leave with a deal – he spent much of last week speaking to his European counterparts to do just that.
“But to get that deal, we need to be prepared to leave with no deal. That’s why after just a few days in the Treasury, I doubled Brexit funding for this year by making an extra £2 billion available for no-deal preparations.
“That means we can recruit up to 1,000 more Border Force staff, create extra capacity to avoid delays with passport applications, and improve transport infrastructure around ports like Tilbury and Dover.”