The Treasury has written to departments to tell them to plan for a further round of funding reductions ahead of next year’s Spending Review.
The first request for details of departmental spending plans was sent to departments last week, according to a report in The Times, with chief secretary to the Treasury Liz Truss called for departments whose budgets have not been protected to work with the finance ministry this summer to identify potential savings.
The letter does not contain a target for reductions, but Hammond has previously warned that the Treasury's £20bn boost for the NHS will leave them with no extra money to spend on their own policy areas, while Truss has told departments they should rein in thier spending demands as there will be little money to boost budgets in the 2019 review.
The full review of departmental spending, announced by Hammond in March, will follow the publication of the overall spending envelope later this year.
One minister told The Times: “Philip Hammond has got Theresa May to agree to no more borrowing [above the fiscal rules] so that means it looks like cuts to pay for the extra money for the NHS. But the answer is to raise taxes to protect spending.”