I have to make tough choices on public pay — Rishi Sunak

Spending Review

Spending Review

While presenting the 2020 spending review at the UK house of commons on Wednesday, Rishi Sunak, UK chancellor to the exchequer, the country's national treasury, said the pandemic will result in the shrinking of the UK economy by 11.3 percent and also lead to a rise in unemployment figures.

Unemployment is forecast to hit 2.6 million by the middle of 2021, official forecasts from the Office for Budget Responsibility (OBR) said. "In 2025, the economy will by three times smaller than expected".

The Chancellor said Northern Ireland's extra £920m was "new funding" which was more than double the £400m provided in the 2019 spending round.

"There may be light at the end of the tunnel regarding the health emergency, but the economic emergency has only just begun".

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

Shadow Chancellor Anneliese Dodds
Shadow Chancellor Anneliese Dodds

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

"During a domestic fiscal emergency, when we need to prioritise our limited resources on jobs and public services, sticking rigidly to spending 0.7 per cent of our national income on overseas aid is hard to justify", Sunak said in a speech to parliament, pointing to record high peacetime borrowing levels.

Xavier Brice, CEO of Sustrans, said there is a "wider concerning disconnect" between the Government's aims and ambitions and the policies it is putting in place.

The Government faced condemnation from charities and a potential Tory revolt when legislation for the move comes before Parliament.

Other Tories critical of the move included former global development secretary Andrew Mitchell and chairman of the Commons defence committee Tobias Ellwood.

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It prompted Foreign Office minister Baroness Sugg to quit in protest and, in her resignation letter to Mr Johnson, she called it the "fundamentally wrong" move, telling the Prime Minister it would "diminish our power to influence other nations to do what is right".

Sunak's choices will set the tone for the ruling Conservative Party's approach to the fiscal legacy of the coronavirus.

To help cope with rising unemployment, the Chancellor set out a almost £3 billion Restart programme to help get people back into work.

Private sector wages have fallen as jobs have been lost, hours have been cut and workers have been furloughed, he said.

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

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Ulster Bank chief economist Richard Ramsey said that despite the gains, total departmental spending will fall marginally year on year.

There will be £27 billion spent on economic infrastructure in 2021-22. It is a fraction of the £2 billion promised by the Government over this parliamentary term and we look forward to the funding increasing over the coming years to help us reach net-zero, tackle physical inactivity, reduce air pollution and create more liveable towns and cities.

Wales will also receive around £110 million less from Westminster in agriculture funding than the £350 million a year the country now receives from the European Union.

The chancellor said the United Kingdom will provide increased pay for healthcare workers in the country and low-income earners to cushion effect of the coronavirus.

"High as these costs are, the costs of inaction would have been far higher", he said.

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