RISHI: IT’S GOING TO BE TOUGH
CHANCELLOR DELIVERS SPENDING REVIEW AS UK FACES DEEPEST RECESSION IN 300 YEARS
RISHI SUNAK slammed the brakes on public pay yesterday as he warned that the ‘economic emergency has only just begun’.
The chancellor said the pandemic will cause the deepest recession for 300 years, with coronavirus spending rising by another £80billion to £280billion this year.
Foreign office minister Baroness Sugg resigned as Mr Sunak abandoned manifesto pledges to overseas aid, slashing nearly a third of its budget and froze pay rises for more than 2million public sector workers.
And with the economy not expected to recover to pre-pandemic levels until the end of 2022 he warned that tax rises were on the way. ‘This situation is clearly unsustainable,’ he told MPs. ‘And we have a responsibility, once the economy recovers, to return to a sustainable fiscal position.’
The chancellor was delivering the government’s first spending review since March 2019 when his predecessor Sajid Javid promised a ‘decade of renewal’. Borrowing has surged since then from two per cent of GDP to a peacetime record of 19 per cent, and will reach £394billion this year.
Mr Sunak pledged to honour government promises, with a new UK Infrastructure Bank and a £4billion levelling-up fund for locally driven projects. And he announced another £55billion for public sector coronavirus spending next year – including £3billion for an NHS recovery fund.
‘Our health emergency is not yet over, and our economic emergency has only just begun,’ he said. ‘Not in the medium term, now.’ Wages will rise for more than 1million NHS staff – and public sector workers earning less than £24,000 will receive a pay rise of at least £250.
But the chancellor said state workers had been protected during the pandemic, while private sector employees saw their pay fall four per cent.
‘Unlike workers in the private sector, who have lost jobs, been furloughed, seen wages cut and hours reduced, the public sector has not,’ he said. ‘I cannot justify a significant, across-the-board pay increase for all public sector workers. This is an economic emergency. That’s why we continue to take
‘Health emergency is not yet over and our economic emergency has only just begun’
extraordinary measures to protect people’s jobs and incomes.’
Mr Sunak warned that unemployment was likely to hit 2.6million after the furlough scheme ended in March.
He promised a 2.2 per cent rise in the national living wage to £8.91 an hour and confirmed a £3billion restart programme to help find work for more than 1million people unemployed for over a year.
He cut the overseas aid budget from 0.7 per cent of national income to 0.5 per cent, despite five former prime ministers urging him not to. He said it may return to 0.7 per cent and insisted ‘we will continue to protect the world’s poorest’. But he added: ‘During a domestic fiscal emergency, sticking rigidly to spending our national income on overseas aid, is difficult to justify to the British people.’
The Institute of Fiscal Studies called the rise in coronavirus spending ‘truly staggering’. Director Paul Johnson said: ‘We should have had these numbers from Treasury or Office of Budget Responsibility as policies were announced rather than wait until now.’ The OBR warned that a no-deal Brexit would knock two per cent off GDP as negotiators attempt to hit the
December 31 deadline. And it said all the forecasts depended on the successful rollout of an effective vaccine. ‘It does not automatically imply an immediate or complete return to normal economic life for the whole population,’ a spokesman added. The chancellor said borrowing would fall to £164billion next year but the national debt would reach 97.5 per cent of GDP by 2025. He promised infrastructure investment would reach a record £100billion this year, with £15billion to help Britain become a ‘science superpower’ and set the nation on the path to recovery.
‘The government is funding the things people want and places need,’ he insisted. ‘The spending announced today is secondary to the courage, wisdom, kindness and creativity that it unleashes. Today we have funded the priorities of the British people and now the job of delivering them begins.’
Labour accused him of taking a ‘sledgehammer to consumer confidence’ with a pay freeze that will hit 90 per cent of police officers and 80 per cent of secondary school teachers. ‘This freeze puts targets for police recruitment in jeopardy, takes vital demand out of the economy, and will slow the economic recovery,’ a spokesman said.