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Spending review: Chancellor Rishi Sunak unveils multi-billion pound investment

Rishi Sunak today revealed what the Government will spend hundreds of billions of pounds on in the coming years, including £38billion for public services to fight Covid-19 for the final weeks of this year.

The Chancellor also pledged £55billion to battle the pandemic in 2021, including £2.6billion for devolved administrations, as he set out his plans in the Spending Review at the House of Commons this afternoon.

Mr Sunak additionally promised a £6.3billion cash increase in NHS spending, a £2.2billion rise for the schools budget and £400million to help recruit 20,000 more police officers by 2023.

Other expenditure announced today included £63million to tackle economic crime, £337million extra money for the criminal justice system and £254million of funding to tackle homelessness and rough sleeping.

Also promised was £100billion of capital expenditure next year on infrastructure, while Mr Sunak confirmed the Prime Minister’s announcement for more than £24billion of investment in defence.

Further items were £4.2billion for NHS operational investment next year, £260million on digital infrastructure and £5.2billion to double flood and coastal defence investment across England over six years.

Chancellor Rishi Sunak delivers his autumn Spending Review in the House of Commons this afternoon

Here is the full list of what Mr Sunak promised in his Spending Review today: 

  • £38billion extra for public services to fight Covid-19 this year
  • £55billion to tackle coronavirus in 2021, including £2.6billion for devolved administrations.
  • £6.3billion increase in NHS spending in 2021-22, on top of £3billion of investment to help NHS recovery
  • £2.2billion rise for the core schools’ budget in 2021-22
  • £400million to help recruit 20,000 additional police officers by 2023, with 6,000 new officers in 2021-22
  • £63million to tackle economic crime,
  • £337million extra funding for the criminal justice system and a counter-terrorism operations centre
  • £3billion of additional Covid-19 support for local authorities 
  • £254million of funding to tackle homelessness and rough sleeping.
  • £3.6billion on the Plan for Jobs, including a £2.9billion ‘Restart scheme’ to help unemployed people find work
  • £100billion of capital expenditure next year on infrasutrcture
  • £4billion ‘Levelling Up Fund’ to invest in infrastructure with ‘a visible impact on people and their communities’ 
  • £10billion of foreign aid, officially known as ‘Official Development Assistance’, in 2021-22.
  • £24billion investment in defence, confirming recent announcement by Boris Johnson
  • £19billion of transport investment next year, including £1.7billion for local roads maintenance and upgrades
  • £15billion on research and development in 2021-22
  • £4.2billion for NHS operational investment next year for hospitals to refurbish and maintain infrastructure
  • £325million of new investment in NHS diagnostics equipment
  • £260million on digital infrastructure programmes, such as 4G rural networks and 5G programmes
  • £58billion of investment confirmed for road and rail
  • £20billion of investment on housing, including £7.1billion for a National Home Building Fund
  • £5.2billion on flood and coastal defence investment across England over six years
  • £1.2billion to subsidise the rollout of gigabit-capable broadband
  • £2billion of funding for High Speed 2 rail
  • £8.91/hour – Increase in the National Living Wage, by 2.2 per cent from April 2021 
  • At least £250 pay rise – For 2.1 million public sector workers who earn below the median wage of £24,000

As Mr Sunak set out his Spending Review today, he said the economic emergency caused by coronavirus has only just begun and there will be ‘lasting damage’ to the UK. 

Official forecasts showed the UK economy was expected to shrink by 11.3 per cent this year, the worst recession for more than 300 years.

The Chancellor told MPs that the Office for Budget Responsibility did not expect the economy to return to its pre-crisis levels until the end of 2022 and the damage was likely to last.

Rishi Sunak fails to rally FTSE 100 with pledge to splash more cash

The London stock market failed to rally this afternoon after the Chancellor said Britain’s ‘economic emergency has only just begun’ in his Spending Review.

The FTSE 100 index of Britain’s biggest companies was down by 0.65 per cent or 42 points to 6,390 soon after Rishi Sunak began speaking in the Commons, hours after being up at 6,464 in early trading.

THIS WEEK: The FTSE 100 was down this afternoon after being up at 6,464 in early trading this morning

THIS WEEK: The FTSE 100 was down this afternoon after being up at 6,464 in early trading this morning

Hargreaves Lansdown analyst Susannah Streeter said: ‘This is a brutal assessment of the damage wreaked on the economy by Covid-19 but it’s far from unexpected.

‘But desperate times need desperate measures and sustained government spending is vital to help the economy climb out of the abyss.

‘The FTSE 100 dropped further from recent highs after the Chancellor Rishi Sunak was speaking as the scale of the problem was laid bare amid worries about the outcome of the fraught Brexit negotiations.’

Initial gains on the FTSE 100 this morning fizzled out by midday as dealers worried about the impact of a spike in Covid-19 infections around the world.

The ‘long-term scarring’ would mean that in 2025 the economy will be around 3 per cent smaller than expected in March.

Mr Sunak said: ‘Our health emergency is not yet over. And our economic emergency has only just begun. So our immediate priority is to protect people’s lives and livelihoods.’

The OBR forecasts show a recovery is expected over the coming years, with growth of 5.5 per cent forecast next year as coronavirus restrictions are eased, then 6.6 per cent in 2022, 2.3 per cent in 2023, 1.7 per cent in 2024 and 1.85 per cent in 2025. 

The Government will borrow an eye-watering £394 billion this year, equivalent to 19 per cent of GDP – the highest ever recorded in peacetime.

Although borrowing will subsequently fall, the national debt is forecast to reach 97.5 per cent of GDP in 2025-26.

‘This situation is clearly unsustainable over the medium term,’ Mr Sunak admitted.

While Mr Sunak continued to allocate large sums to tackling the ongoing emergency he confirmed there would be restraint in pay awards for public sector workers and a cut in overseas aid.

The Chancellor said he ‘cannot justify a significant, across-the-board’ pay increase for all public sector workers in the circumstances.

Over a million nurses, doctors and others working in the NHS will get a rise but pay rises for the rest of the public sector will be ‘paused’ – except for the 2.1million workers earning below the median wage of £24,000, who will receive an increase of at least £250.

The cut to the aid budget sees the Government reneging on a legal pledge and manifesto commitment to spend 0.7 per cent of national income on development assistance.

Mr Sunak said: ‘Sticking rigidly to spending 0.7 per cent of our national income on overseas aid, is difficult to justify to the British people, especially when we’re seeing the highest peacetime levels of borrowing on record.’

Instead of the existing target, Mr Sunak said 0.5 per cent would be spent in 2021, around £10billion.

The Government faced condemnation from charities and criticism from senior Tories about the move.

But Mr Sunak insisted that ‘at a time of unprecedented crisis government must make tough choices’ and promised that spending would return to 0.7 per cent ‘when the fiscal situation allows’.

According to the OBR forecasts, unemployment is set to soar to 7.5 per cent in the second quarter of 2021 – with 2.6million people out of work – falling to 4.4 per cent by the end of 2024. 

The Chancellor set out a nearly £3billion Restart programme to help get people back into work.

For those in work, the national living wage will increase by 2.2 per cent to £8.91 an hour – lower than the £9.21 rate previously expected from April 2021.

Mr Sunak said £280billion was being spent on the coronavirus response this year.

The OBR released its first forecasts for the economy since March - with an 11.3 per cent downturn for this year, which would be the worst since 1609

The OBR released its first forecasts for the economy since March – with an 11.3 per cent downturn for this year, which would be the worst since 1609 

The OBR produced three different scenarios, with the downside versions considerably worse than its central expectation

The OBR produced three different scenarios, with the downside versions considerably worse than its central expectation

The watchdog warned that GDP could end up performing considerably worse if the coronavirus recovery does not go well

The watchdog warned that GDP could end up performing considerably worse if the coronavirus recovery does not go well

On the central forecast, growth returns next year but there it takes until the end of 2022 to reach pre-pandemic levels

On the central forecast, growth returns next year but there it takes until the end of 2022 to reach pre-pandemic levels

Chancellor Rishi Sunak is pictured working on his Spending Review speech in his flat above 11 Downing Street yesterday

Chancellor Rishi Sunak is pictured working on his Spending Review speech in his flat above 11 Downing Street yesterday

Next year some £55billion was earmarked for public services dealing with the crisis, including an initial £18 billion for testing, personal protective equipment and vaccines.

‘Shameful and wrong’  to cut foreign aid budget, says Archbishop

The Archbishop of Canterbury has attacked the Government for its ‘shameful and wrong’ cuts to the foreign aid budget, as Boris Johnson faced intense criticism for reversing one of the pledges in his election manifesto.

Chancellor Rishi Sunak announced the overseas aid budget will be cut to 0.5 per cent of gross national income in 2021, adding that the Government’s ‘intention’ was to return to 0.7% when the fiscal situation allows.

The decision prompted a fierce backlash, including from Justin Welby, who tweeted: ‘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. I join others in urging MPs to reject it for the good of the poorest, and the UK’s own reputation and interest.’

Oxfam chief executive Danny Sriskandarajah said: ‘Cutting the UK’s lifeline to the world’s poorest communities in the midst of a global pandemic will lead to tens of thousands of otherwise preventable deaths.’

Highlighting the Government’s announcement of an increase in spending on defence, Mr Sriskandarajah added: ‘At a time when hundreds of millions of people are hungry and decades of progress against poverty is under threat, today’s decision is a false economy which diverts money for clean water and medicines to pay for bombs and bullets.’

The criticism follows interventions ahead of the statement from former prime ministers Sir John Major, David Cameron and Tony Blair, as well as Nobel Prize laureate Malala Yousafzai.

Sir John told The Times: ‘Cutting our overseas aid is morally wrong and politically unwise. It breaks our word and damages our soft power. Above all, it will hurt many of the poorest people in the world. I cannot and do not support it.’

The 0.7 per cent target is written into law and Mr Johnson’s 2019 election manifesto promised to keep it.

Despite the dire national finances, total departmental spending will be £540billion in 2021-22, a £14.8billion rise in cash terms.

Over this year and next, day-to-day departmental spending will rise, in real terms, by 3.8 per cent – the rate in 15 years.

The Scottish Government’s funding will increase by £2.4billion, Wales will receive £1.3 billion and there is £0.9billion for the Northern Ireland Executive. 

Meanwhile a further £2.1billion of taxpayers’ money has been allocated to covering private train company losses during the pandemic.

The Treasury announced the figure as part of its Department for Transport funding in Wednesday’s Spending Review.

The Government took over rail franchise agreements from train companies in March, following the collapse in demand for travel caused by the virus crisis.

This involves taxpayers covering lost fare revenue and paying a fee of up to 1.5 per cent of pre-pandemic operating costs to keep services running.

An estimated £8billion will be spent in the current financial year, with a further £2.1billion allocated for 2021/22. 

Business leaders said the Chancellor had taken ‘bold’ decisions, but urged the Government to waste no time putting the plans into action.

Rain Newton-Smith, the CBI’s chief economist, said stark forecasts pointed to ‘tough times ahead’, adding: ‘The Chancellor has made some bold autumn decisions to power a spring recovery.

‘The Spending Review lays the foundations for a brighter economic future. A new National Infrastructure Bank, long-term funding for innovation, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision.

‘Ambition must be matched by action on the ground. The Government’s commitment to build, build, build must be delivered now, and there can be no let-up in the support for firms facing new Covid restrictions.’

Adam Marshall, director general of the British Chambers of Commerce, said: ‘Measures to help people return to work at this challenging time will help limit long-term unemployment, but Government must waste no time in putting these plans into action.

‘Government and business will need to work together to re-train and re-skill the UK workforce. Investment in the Kickstart Scheme, in which Chambers are playing a leading role, and the launch of the Restart scheme, will be critical in helping to achieve that.

‘With an uncertain winter ahead, the Government will need to maintain an open mind on providing further support to businesses struggling to survive.’ 

Chancellor faces union backlash over pay ‘pause’ for public sector apart from NHS nurses and doctors

The Chancellor has been warned he is on a collision course with public sector workers after he announced a ‘pause’ in rises for many next year.

Rishi Sunak said nurses, doctors and others in the NHS will get a pay rise, but for the rest of the public sector, any increase will be paused, affecting firefighters, teachers, the armed forces, police, civil servants, council and Government agency staff.

Mr Sunak added that the lowest paid public sector staff – those earning below £24,000 – would see their pay increased by at least £250.

Rehana Azam, national officer of the GMB union, said: ‘The Chancellor’s public sector pay freeze will hit key workers who have risked everything during the pandemic.

‘This attempt to divide and rule will put him on a direct collision course with public service workers, and he should know that we fought the public sector pay cap before and we busted it.

‘GMB will not accept more pay cuts for our members at a time when the whole country is relying on them.

‘The Government should tax those who have profited from the pandemic – get them to stump up the cash that has lined their pockets, whilst our keyworkers have kept the UK going.’

Mark Serwotka, general secretary of the Public and Commercial Services union (PCS) said: ‘Civil servants and other public sector staff will feel a deep sense of betrayal at today’s pay freeze.

‘Despite keeping the country running during the Covid crisis, supplying Universal Credit and helping businesses access the furlough scheme, the Chancellor has justified a pay freeze by pointing to lower wages in the private sector.

‘Today’s announcement has intensified long-standing anger at a decade of pay restraint and increased the likelihood of industrial unrest in the public sector.’

Mick Cash, leader of the Rail, Maritime and Transport union (RMT) said: ‘It is shameful that the Government is employing a policy of divide and rule of private and public key workers, all of whom have risked their lives during the pandemic.

‘RMT will have no hesitation in taking strike action to deliver our members the pay rise they deserve and in supporting national coordinated action to deliver pay justice for all key workers.’

Unite assistant general secretary Gail Cartmail said: ‘The Chancellor Rishi Sunak has delivered a body blow to the public sector workers he has targeted to bear the brunt of the costs of the pandemic with a pay freeze – his so-called ‘pause’.

‘The sop of £250 to the two million public sector workers earning under £24,000-a-year is insulting and compares badly with the inflated sums that the Government has wasted on PPE contracts for those with links to the Tory establishment.’

Unison general secretary Dave Prentis said: ‘This is austerity, plain and simple.

‘A decade of spending cuts left public services exposed when Covid came calling. The Government is making the same disastrous mistake again.

‘Going after the pay of millions will be a bitter pill for key workers getting the UK through the pandemic and out the other side.’