The Chancellor has set out what the UK government will spend on health, education, transport and other public services next year.
In a statement in the House of Commons Rishi Sunak also briefed MPs about the state of the UK economy and the latest forecasts for the UK’s public finances, which have been battered by the Covid pandemic.
UK borrowing set to hit almost £400 billion by the end of the year, the economy is expected to contract by 11.3% the largest fall for more than 300 years and unemployment predicted to rise to 7.5% with 2.6m people out of work
The Office for Budget Responsibility says support for public services, households and businesses costs £280bn this year, pushing the deficit to £394bn, or 19% of national output, the highest ratio since 1944.
It puts and debt above 100% of output or gross domestic product for the first time since 1960.
“Our central forecast shows £20-30bn in spending cuts or tax rises would be required to balance revenues and day-to-day spending and stop debt from rising by the end of this Parliament,” it said.
A part of his speech Mr Sunak revealed the economy is forecast to grow by 5.5% next year and by 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 and 1.85 in 2025.
Output is not expected to return to pre-crisis levels until the fourth quarter of 2022
UK debt will be equivalent to 91.9% of GDP this year and rise to 97.5% of GDP in 2025/26 In 2025, the economy will be around 3% smaller than was expected in March Budget forecast
In terms of the public sector pay millions of workers will see real-terms pay cuts next year as their pay is frozen.
Those earning less than £24,000 a year will get a minimum £250 increase.
Elsewhere in terms of wages, the Chancellor announced the National Living Wage is to rise by 2.2% to £8.91 an hour, with 23-year-olds qualifying for the living wage for the first time.
Labours Shadow chancellor Anneliese Dodds attacked the public sector pay freeze, saying it will deliver a “sledgehammer” blow to consumer confidence, while the Government had mismanaged the finances on an “industrial scale
TUC general secretary Frances O’Grady 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.
“After a decade of standstill pay, yet another pay freeze is a kick in the teeth for the key workers in the public sector who kept the country going in this crisis.
Tracy Brabin MP for Batley and Spen said:
“When is a pause not a pause? When it’s a real term pay cut. That’s what the majority of public sector workers are facing, the Chancellor just couldn’t quite bring himself to tell people straight.
The government did their usual trick of floating the worst possible scenario in the press – a complete pay freeze – to try and make those who benefit thankful for their meagre rises.
The Chancellor seems to expect public sector workers – who have carried us through this crisis – to bare the burden of national debt while not touching tax dodgers like Amazon.”
On the National living wage increase Tracy added:
“Any increase is better than none, but let’s face it, it’s still not enough to live on and still not enough to pay the bills. I want better than that for West Yorkshire, that’s why I’ll put a Fair Worker Charter in place for our region in my first year in office if I’m elected.”
The Chancellor revealed that the overseas aid budget to be cut from 0.7% to 0.5% of total national income.
The decision has drawn criticism from The Archbishop of Canterbury, taking to Twitter, Justin Welby said: “The cut in the aid budget – made worse by no set date for restoration – is shameful and wrong.
“It’s contrary to numerous government promises and its manifesto.”
Baroness Sugg has quit as a Foreign Office minister in protest at the government’s plans to cut overseas aid spending.
In a letter to the prime minister, Baroness Sugg said the decision to reduce spending was “fundamentally wrong”.
Adding that “Cutting UK aid risks undermining your efforts to promote a global Britain,
Along with decreasing the aid budget, the Chancellor confirmed the funding will go towards a new centre dedicated to artificial intelligence announced by the Prime Minister as part of the defence budget last week.
£3bn allocated to the Department for Work and Pensions in a three-year programme for supporting those who have been unemployed for 12 months to find work
For the health and social care sector it was announced £18 billion will be spent on Covid testing, PPE and vaccines.
The annual Health Budget will increase by £6bn which will include £3bn for the NHS to tackle the treatment backlog caused by the pandemic.
£500m will be allocated for mental health services. £325m to replace ageing equipment and £300m extra grant funding for councils for social care
Meanwhile, £2bn has been allocated for public transport,
Local Councils like Bradford and Kirklees will receive £3bn in extra funding with £250m for councils to tackle rough sleeping
Over £400m to recruit 6,000 new police officers by the end of 2022 has also been announced.
The Chancellor’s speech contained no major new green announcements, following last week’s unveiling of the Prime Minister’s 10 Point Plan, which was backed by £12bn of funding.
However, he reiterated the government’s commitment to a green recovery, highlighting increased investment in broadband and mobile coverage, upgraded railways, new cycle lanes, and over 800 zero-emission buses, while also touting the “biggest ever investment in new roads”.\
In the announcement, Mr Sunak said he wanted the UK to be a scientific superpower in a new National Infrastructure Strategy. The strategy would be supported by a new UK Infrastructure Bank that would be headquartered in the north of England that would work with the private sector to fund new investment projects across the UK.
Tracy Brabin welcomed the news of the location in the North of England but was cautious of the news
“You always have to be careful when commenting straight after a Chancellors statement because what sounds good from the dispatch box often has some nasty small print when you read the actual policies, but if the government are serious about investing in infrastructure, I’ll welcome that.
We hear headlines all the time with no action to back them up. If that funding is coming to the North, I want it to come here to West Yorkshire and if I’m our Mayor it will be at the top of my priority list.”
Chancellor Rishi Sunak said: “My number one priority is to protect jobs and livelihoods across the UK.
“This Spending Review will ensure hundreds of thousands of jobs are supported and protected in the acute phase of this crisis and beyond with a multi-billion package of investment to ensure that no one is left without hope or opportunity”.
Labours Shadow Chancellor Anneliese Dodds said a longer-term spending review was needed soon “to build a future for our country as the best place in the world to grow up in and the best place to grow old in”.
She criticised Mr Sunak for not mentioning Brexit in his speech, with the UK set to leave the EU single market and customs area at the end of the year.
She added: “There’s still no trade deal. So, does the chancellor truly believe that his government is prepared and that he’s done enough to help those businesses that will be heavily affected?”
The OBR said: “The economic outlook remains highly uncertain and depends upon the future path of the virus, the stringency of public health restrictions, the timing and effectiveness of vaccines, and the reactions of households and businesses to all of these.
“It also depends on the outcome of the continuing Brexit negotiations.”