Chancellor warns of ‘lasting’ damage to UK economy as he announces emergency spending review

Rishi Sunak says the spending review comes as the coronavirus health emergency is not over and the economic emergency has only just begun.

Sunak said he will prioritise jobs, businesses and public services, the chancellor says the government is spending £280bn to get the country through Covid-19.

Next year, the government will allocate an initial £18bn in response. There will be £3bn for the NHS, £2bn for keeping transport running, £3bn to local councils, and extra £250m to end rough sleeping. Total funding to tackle coronavirus will be £55bn, he says.

Sunak said that a new “levelling up” fund worth £4bn is being set up. It will be managed by the Treasury, the transport department and the communities department.

It will take a holistic approach, he says. Projects must command local support, including from MPs.

This will fund what people and places need, he says.

The other main highlights from the announcement were:


  • The chancellor says forecasts from the Office for Budget Responsibility show the economy will contract by 11.3% this year, the biggest decline in three centuries.
  • Sunak says it will take until the end of 2022 for the economy to return to its pre-pandemic size.
  • GDP will grow by 5.5% next year, 6.6% in 2022, 2.3% in 2024, 1.7 in 2025 and 1.8% in 2026.
  • In July, the OBR said its “central scenario” was for a 12.4% plunge in gross domestic product (GDP) this year.
  • This compares with estimates made at the start of November from the Bank of England for an 11% fall in 2020.


  • Sunak says the budget deficit will be £394bn this year, or 19% of GDP – the highest level in peacetime.
  • Borrowing will remain at £164bn next year and remains at about £100bn for the remainder of the forecast.
  • In July, the Office for Budget Responsibility (OBR) estimated a budget deficit – the gap between spending and tax income – of £322bn for 2020-21.
  • The OBR had previously estimated the national debt – the sum total of every budget deficit – of £2.2tn in 2020-21, or 104.1% of GDP.

Public sector pay

  • Pay rises for the public sector will be paused next year, with an exemption for more than 1 million nurses and doctors in the NHS.
  • 2.1 million public sector workers who earn below the median wage of £24,000 will be guaranteed a pay rise of at least £250.
  • Sunak says he cannot justify a significant across-the-board pay increase for public sector workers, to protect public sector jobs and ensure fairness between the public and private sectors.
  • The chancellor says the national living wage will be increased to £8.91 an hour, and extended to over-21s.
  • Overall unemployment is forecast to peak next year at 7.5%.

Departmental spending

  • Sunak says day-to-day departmental spending will rise in real terms by 3.8%, the fastest growth rate in 15 years.
  • He says in cash terms, this will be an increase of £14.8bn on current levels.
  • The government will match EU funding for regional development after Brexit, he says. Funding for communities to pilot programmes will be made next year.
  • The core health budget will grow by £6.6bn. The chancellor says this will help to hire 50,000 new nurses.
  • The schools budget will increase by £2.2bn.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>