Rishi Sunak warns ‘economic emergency has just begun’ as he unveils last Covid splurge to save jobs and ‘level up’
RISHI Sunak today warned the “economic emergency has just begun” as he unveiled a final Covid splurge to save jobs and level up before economic pain next year.
The Chancellor has spelled out the details of his one-year spending review in the Commons this afternoon – but it came with a gloomy set of economic forecasts.
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The Chancellor announced a pay rise for NHS staff – but other public sector workers will see a freeze[/caption]
Chancellor Rishi Sunak is revealing his Spending Review today[/caption]
His economic warnings are ‘sobering’ – with the economy not recovering until 2022[/caption]
Individuals, families and communities must become stronger, healthier and happier as a result of this Spending Review.
That is the true measure of our success.
— Rishi Sunak (@RishiSunak) November 25, 2020
He began with a stark warning about the state of the UK’s finances, and warned that the economy would be “around 3% smaller” in 2025 than previously predicted.
Revealing the scale of the problems the nation faced, he warned: “Our health emergency is not yet over. And our economic emergency has only just begun.
“That’s why we have taken, and continue to take, extraordinary measures to protect people’s jobs and incomes. And it is clear those measures are making a difference.”
It came as anger grew over threat of towns and cities being plunged into Tier 3 tomorrow sparking more economic chaos.
In a gloomy statement he told MPs and the nation:
- The Government is on track to dish out a huge £280bn to get our country through coronavirus this year alone – and £18billion is planned for next year
- The nation’s debt is forecast to continue rising in every year, reaching 97.5 per cent of GDP in 2025-26
- The economy will shrink by 11 per cent this year – the largest fall for more than 300 years
- Unemployment will rise to a peak of 7.4 per cent – 2.6million people – by the second quarter next year
- NHS staff to get pay RISE but millions of public sector workers face pay freeze
- 2million will get a National living wage hike to £8.91 an hour
- Foreign aid will be cut to 0.5 per cent of GDP next year – but he hopes to raise it back again afterwards
- A £4billion ‘levelling up’ fund to help areas in the North hit hardest by the pandemic
- Day to day public spending is up overall in real terms by 3.8 per cent, or £14bn more
- Manifesto promises kept on schools, hospitals and police funding
Dire financial warnings said Britain faces years of disruption as a result of the coronavirus crisis – and it will take years to pay back the nearly £400billion borrowed this year.
He stuck to promises to fund public services with more cash for schools, hospitals and the police.
But pay will be frozen for millions of public sector workers, and foreign aid manifesto vows were broken.
In a glimmer of hope the OBR forecasts now show Britain is on course to defy previous predictions with a recovery by 2022 – by recording the fastest GDP growth since 1941.
The Chancellor told Cabinet this morning that “the forecasts will show the impact the coronavirus pandemic has had on our economy will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels.”
Where will cash go next year?
- £15 billion for Test and Trace
- £3 billion to support the NHS to recover from the impacts of Covid-19 including around £1 billion to begin tackling the elective backlog; around £500 million for mental health services and workforce investment; and £1.5 billion to help ease existing pressures in the NHS caused by Covid-19
- In 21-22 an additional £733 million for the purchase of successful Covid-19 vaccines
- £128 million to support vaccines R&D, including clinical trials, and UK manufacturing capacity
- £2.14 billion to purchase and distribute PPE, sufficient funding to meet expected demand and maintain a 4-month stockpile across 2021-22
- £163 million for Covid-19 medicines
- A new Restart programme to provide intensive and tailored support to over 1 million unemployed people and help them find work in England and Wales, with approximately £400million investment in 2021-22
- Investing £1.4billion to build on the Plan for Jobs commitment to increase capacity in Job Centre Plus and double the number of work coaches in Great Britain.
- Next year, the core health budget will grow by £6.6bn
- £2.2bn more for schools next year
- Funding for the criminal justice system will increase by over £1bn
- £100bn for capital investment by 2022
Mr Sunak promised to protect people’s lives and livelihoods with the “support they need to get through Covid”.
Last month, he extended the furlough scheme to last through until March as Boris Johnson warned the UK faced a “hard winter” of further coronavirus restrictions.
But as it’s not a Budget or an Autumn Statement, today’s event won’t contain huge tax tweaks or other major fiscal changes.
BACK TO WORK
He revealed a three-year programme — the Restart Scheme — to try to assist more than a million long-term unemployed.
The concept is to give those who have been out of work for 12 months-plus regular intensive support to suit their circumstances.
But the Treasury estimates the scheme could be successful for only around 300,000, though they claim this will make it worthwhile.
That is just 70,000 more than would find work without the extra support, costing taxpayers around £42,000 for each job found.
A similar scheme launched by the 2010 Coalition Government stimulated £3.21 of extra economic activity for every £1 spent in four years.
There will be a further £1.4billion of funding for Job Centre Plus.
The chancellor putting the final touches on the spending review last night[/caption]
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Mr Sunak has repeatedly stressed the Treasury will need to find ways to bring back the long-term health of public finances.
But both the PM and the Chancellor have dismissed suggestions it will signal a return to austerity with huge spending cuts.
The alternative means big tax rises are expected, but they won’t come until Britain is through the worst of the pandemic.