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hancellor Rishi Sunak warned that the “economic emergency has only just begun” as he unveiled his first Spending Review in the wake of the coronavirus crisis.
He said the fiscal damage of the pandemic was “likely to be lasting” and cited figures from the Office of Budget of Responsibility that predicted unemployment to peak at 7.5 per cent — 2.6 million people — in the second quarter of 2021.
Official forecasts showed the UK economy was expected to shrink by 11. per cent this year, the worst recession for more than 300 years.
The Chancellor told MPs that the OBR did not expect the economy to return to its pre-crisis levels until the end of 2022.
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 2.1 million workers earning below the median wage of £24,000, who will receive an increase of at least £250.
Foreign spending will be cut to 0.5 per cent of gross national income in 2021, Mr Sunak confirmed, but he said the Government’s “intention” was to return to 0.7 per cent when the fiscal situation allows.
Mr Sunak said the Government is providing £280 billion to “get our country through coronavirus”, telling MPs: “Next year, to fund our programmes on testing, personal protective equipment and vaccines, we are allocating an initial £18 billion.”
The Chancellor said £3 billion would be provided to support NHS recovery – allowing them to carry out up to one million checks, scans, and operations – while more than £2 billion will be spent on transport, with funding to subsidise rail networks.
He added: “And while much of our coronavirus response is UK-wide, the Government is also providing £2.6 billion to support the devolved administrations in Scotland, Wales and Northern Ireland.
“Taken together, next year, public services funding to tackle coronavirus will total £55 billion.”
Mr Sunak said underlying debt is forecast to be 91.9 per cent of GDP this year and is forecast to continue rising – reaching 97.5 per cent of GDP in 2025/26.
Nearly £3 billion would be provided to Work and Pensions Secretary Therese Coffey to deliver a new three-year “restart programme” to help more than one million people who have been unemployed for more than 12 months to find new work.
Mr Sunak said the UK is forecast to borrow a total of £394 billion this year, equivalent to 19% of GDP, telling MPs: “The highest recorded level of borrowing in our peacetime history.
“Borrowing falls to £164 billion next year, £105 billion in 2022/23, then remains at around £100 billion, 4% of GDP, for the remainder of the forecast.
“Underlying debt – after removing the temporary effect of the Bank of England’s asset purchases – is forecast to be 91.9% of GDP this year.”
The Chancellor said borrowing would fall to £164 billion next year, £105 billion in 2022-23, and then remain at around £100 billion for the remainder of the forecast period.
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