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:
Growth
- 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.
Borrowing
- 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.
