THIS IS GOING TO HURT, BRITAIN!
Rishi spells out terrifying cost of Covid ++ Jobless to hit 2.6m ++ National debt will top £2.8trillion ++ And a grim warning: Years of tax rises ahead
Rishi sunak braced Britain for years of postCovid tax rises yesterday.
Warning that ‘our economic emergency has only just begun’, he said the pandemic had caused the worst recession in 300 years. The Chancellor forecast 2.6million jobless within months and borrowing of almost £400billion this year.
The Office for Budget Responsibility
said annual tax rises or spending cuts of £21billion – and possibly as much as £46billion – were needed.
National debt is expected to hit a staggering £2.8trillion by 2025-26.
Mr Sunak told MPs that ‘long-term scarring’ caused by the pandemic meant GDP would not regain its 2019 level until the end of 2022. Even by 2025 the economy is set to be 3 per cent smaller than it would have been without coronavirus.
Unveiling a one-year spending review, Mr Sunak only hinted at future tax rises, saying: ‘We have a responsibility,
once the economy recovers, to return to a sustainable fiscal position.’
He added: ‘Our health emergency is not yet over. And our economic emergency has only just begun.’
Despite the dire economic forecasts he vowed to keep splashing out to tackle the pandemic and protect jobs. Whitehall departments will get an extra £14.8billion and £100billion will be ploughed into infrastructure.
Mr Sunak pitched to the Tories’ new seats in the North and Midlands with a £ 4billion ‘ levelling- up fund’ for their left-behind communities.
However he risked a backlash by freezing the pay of some public sector workers and slashing £4billion off the foreign aid budget.
On a day when the cost of the pandemic was dramatically laid bare: n Mr Sunak revealed that £280billion had been spent on the pandemic and its fallout; n Boris Johnson warned Tory MPs that today’s announcement on Covid tiers would be ‘tough’;
■ MPs demanded assurances from ministers that Britain was not facing lockdown by another name;
■ A row broke out over the OBR’s figures after it emerged they had been drawn up before Monday’s announcement on the Oxford vaccine;
■ Families were warned council tax may rise by more than 5.8 per cent next year to pay for social care;
■ The OBR forecast that house prices would be 17 per cent lower than predicted, with values dropping when the stamp duty holiday ends next year;
■ Aid minister Baroness Sugg resigned after Mr Sunak abandoned the manifesto pledge to spend 0.7 per cent of income on aid;
■ Michael Gove wrote to the Independent Parliamentary Standards Authority asking it to cancel a planned £3,000 pay rise for MPs;
■ The Chancellor was accused of ‘pork barrel politics’ over claims that the ‘levelling-up fund’ would be targeted at Conservative seats;
■ The national minimum wage will rise by 2.2 per cent to £8.91 an hour;
■ The OBR warned a No Deal Brexit would wipe 2 per cent off GDP and lead to a slump in sterling.
The Treasury said it was too early to map out what scale of tax rises and spending cuts would be needed.
But former Treasury minister David Gauke said Mr
Sunak was ‘ going to have to rely pretty heavily on taxes rather than spending – it’s a different set of circumstances than in 2010.’
Most Tory MPs congratulated the Chancellor on steadying the ship in a turbulent year in which he has made 14 policy interventions.
But Sir Edward Leigh said it was time to start reining in spending, adding: ‘We’re heading for disaster. We’re spending far too much money.’
The OBR, which produces independent forecasts for government, predicted borrowing would hit £394 billion before falling back next year to £164billion. Worryingly, it forecast that borrowing would still be running at £100billion a year in 2024.
Mr Sunak fudged a heavily trailed squeeze on public sector pay. He said he could not ‘justify a significant, acrossthe-board’ raise for all 5.5million state workers given the difficulties in the private sector.
Over a million nurses, doctors and others working in the NHS will get a rise, while those earning less than £24,000 will get a flat-rate increase of £250.
But roughly 1.3 million others, including teachers and police officers, will have their pay frozen. Rain Newton-Smith of the CBI said the review laid ‘the foundations for a brighter economic future’ but ‘ambition must be matched by action’.
But Shadow Chancellor Anneliese Dodds condemned the public pay freeze and said the spending review took ‘a sledgehammer to consumer confidence’.
And Frances O’Grady of the TUC said: ‘For all the Government’s talk of levelling-up, this spending review will level down Britain, hitting key workers’ pay and breaking the Government’s promises to the lowest paid.’
The Institute for Fiscal Studies said £ 9.6billion of the increase in Whitehall spending will go to just three areas – health, defence and schools.
‘Other areas are facing more of a squeeze and some could even be facing cuts after next year,’ the think-tank said.
David Cameron condemned the aid budget decision, referring in a tweet to the millions starving around the world, mothers dying in childbirth and children falling victim to preventable diseases.