Spending review live: Sunak pledges cash for city centres and transport but aid and public sector pay cut
Rishi Sunak will unveil his long-awaited comprehensive spending review in the House of Commons this afternoon. Follow our City PM live blog to keep up to date with the most important announcements.
17.09 Signing off on our live blog
Thanks for joining us for one of Westminster’s largest events this year.
We’re winding up the live blog, however our coverage still continues. Keep in touch with our ongoing coverage of the spending review and its fallout at citypm.eu.
16.40pm IFS chief reacts to spending review
Head of the widely respected Institute for Fiscal Studies (IFS) think tank Paul Johnson said Sunak has been spending “truly astonishing amounts of money” in 2020.
“Yet this was a spending review in which he reduced planned spending into the future, cutting more than £10 billion per year from departmental spending plans next year and for subsequent years,” he said.
“He has also allocated precisely nothing for Covid related spending after next year. And these plans assume that the temporary increase in Universal Credit will not continue beyond this year. Each of these assumptions is questionable.”
16.19 Small business lobby pans spending review
The Federation of Small Businesses said it was disappointed that the chancellor “had very little to say today about the importance of business and private sector job creation”.
The group’s national chair Mike Cherry said: “This spending review was a missed opportunity to help small business owners – not least those who have been excluded from support measures. We have outlined proposals for a workable Directors Income Support Scheme and we need to see them taken forward.
“Today brings the need for a pro-business Spring Budget into focus. Rather than being a tax-raising Budget, it must have growth and recovery at its heart.”
16.02 London’s employment rate worst hit by Covid in UK
The unemployment rate has risen more in London throughout the Covid crisis than anywhere else in the nation, according to today’s spending review.
The document says employment fell by 4.6 per cent in the capital, which “reflects the importance of hospitality and entertainment in that region”.
15.22 Crossrail will be completed
The government committed to finishing the long-delayed Crossrail in the spending review, a move welcomed by the London Chamber of Commerce.
Chamber Chief executive Richard Burge said: “The commitment shown to completing Crossrail is welcome, and it’s vital that the government also continue to support Transport for London until passenger levels are able to safely return.”
15.11 Lib Dem London Mayor candidate: ‘Govt’s anti-London agenda must stop’
Liberal Democrat Mayor of London candidate Luisa Porritt has blasted the government for having an ‘anti-London agenda”.
She said although the Chancellor mentioned that employment had fallen the most in London, Sunak made no no reference to London other than “taking jobs away from the capital”.
“The Chancellor must recognise that London has among the poorest areas in the country. ‘Levelling Up’ must happen within all regions, rather than the government choosing crudely between them,” she added.
14.58 Khan: Govt ‘ushering in a new era of austerity in London’
Mayor of London Sadiq Khan was less than impressed with the spending plans outlined by the Chancellor this afternoon.
He said there was nothing to help London in any meaningful way in spending review, and though the economic forecasts make for grim reading, “making Londoners poorer” was not the answer.
In a statement Khan said: “Right now, businesses across our hospitality sector in London are on a financial knife edge facing more restrictions over winter but without the grants and government support they need to stay afloat. The same applies to our retail, leisure and culture sectors which, before the pandemic, were contributing hugely to our economy.
“It also remains a scandal that 3 million people across the UK are still receiving absolutely no government help at all – including around 200,000 self-employed people in the capital.
“At the same time, the government seems intent on ushering in a new era of austerity in London that will choke off our economic recovery at a time when businesses are facing huge uncertainty with the end of the Brexit transition period in just over a month.”
14.52 Baroness Sugg resigns
Baroness Sugg of the Foreign and Commonwealth office has resigned as a DFID minister following spending cuts to international aid today.
Sunak said the government would cut down its commitment on overseas aid in 2021 from a promised 0.7 per cent of gross GDP 0.5 per cent.
14.26 And to make the numbers worse…
The Office for Budget Responsibility has said a “no-deal” Brexit will hit the UK economy to the tune of two per cent next year and scar the economy for years to come, adding to the economic pain of the Covid-19 pandemic and subsequent lockdowns.
13.58 CBI economist’s response
Rain Newton-Smith, the chief economist from business group the CBI said this of the chancellor’s £400m infrastructure bank.
“We know just how vital refreshing our ageing infrastructure is to repower the economy, connect more people and create job opportunities across the UK. Putting money into roads, broadband and clean energy will help do just that.
“Most importantly of all, the Government has set out its stall for the long-term by creating a National Infrastructure Bank. With the right remit, the bank has the potential, to crowd in the private finance that will be crucial to delivering these new projects.”
Rain Newton-Smith
13.38 No mention of Brexit in spending review speech
Dodds has also questioned why there was no mention of Brexit in Sunak’s speech, despite being just over a month away from leaving the EU’s single market and customs union.
“In less than 40 days we’re due to leave the transition period, but the chancellor didn’t even mention that in this speech,” she said.
“There’s still no trade deal, so does the chancellor truly believe his government is prepared and he’s done enough to help those businesses that will be heavily affected?”
13.33 Shadow chancellor says all public sector workers should get pay rise
Labour shadow chancellor Annelise Dodds said all public sector workers should get pay rises, not just NHS workers and low wage workers.
“Firefighters, police officers and teachers will know there spending power is going down so they will spend less on our businesses and High Streets, they will spend less in our private sector,” she said.
13.25 ‘Levelling up’ fund
The spending review also features a £4bn “levelling up fund” for towns and cities to bid for.
13.22 Sunak announces infrastructure bank
The government will increase capital spending to £100bn next year – £27bn more in real terms than last year – and set up a national infrastructure bank.
The bank will be headquartered in the North and it will “work with the private sector to invest major new investment projects across the UK starting this spring”.
Sunak said the “once in a generation” infrastructure spending is the highest sustained level of public spending in 40 years.
“To build housing, we’re introducing a £7.1bn national home building fund on top of our £12.2bn affordable home programme,” the chancellor said.
“We’ll deliver faster broadband for 5m premises across the UK.
“Better mobile connectivity with 4G coverage across 95 per cent of the country by 2025, the biggest ever investment in new roads, upgraded railways, new cycle lanes and over 800 zero emission buses.
“We’re making this country a scientific powerhouse with £15bn of funding for research and development.”
13.15 New Covid package for devolved governments
13.14 Foreign aid target slashed
Sunak has cut the government’s overseas aid target from 0.7 per cent of GDP a year to 0.5 per cent.
“During a fiscal emergency when we need to prioritise our resources on jobs and public services, sticking rigidly to spending 0.7 per cent on overseas aid is difficult to justify to the British people, especially when we’re seeing the highest levels of peacetime borrowing on record,” he said.
“Our intention is to return to 0.7 per cent when the fiscal situation allows.”
13.09 Departmental spending to hit £540bn next year
Departmental spending will rise by 3.8 per cent to £540bn – the largest year-to-year rise ever.
13.06 NHS staff to get pay rise in spending review
Sunak will give a pay rise to 1m NHS workers, however there will be a public sector pay freeze for other workers.
The pay freeze will not count for 2.1m workers earning £24,000 or less.
13.00 Unemployment to hit 7.5 per cent
The OBR forecast predicts unemployment to rise to 7.5 per cent, leading to 2.6m people being out of work.
It is currently at 4.8 per cent.
“Unemployment is then forecast to fall in every year and hit 4.4 per cent by the end of 2024,” Sunak said.
12.57 Deficit to hit £394bn after spending review
The deficit will reach £394bn this fiscal year – a whopping 19 per cent of GDP.
This is the highest level of borrowing in peacetime history.
The deficit will drop to £164bn next year, £105bn the year after that and remain at 100bn for the remainder of the forecast
“Underlying debt..is forecast to be 91.9 per cent of GDP this year and due to elevated borrowing levels, underlying debt is forecast to continue rising in every year reaching 97.9 per cent of gdp in 25-26,” Sunak said.
Sunak foreshadows future tax rises as he says says that the government has “a responsibility” to return to cut spending.
12.51 GDP to fall by 11 per cent in 2020
Sunak says that the Office for Budget Responsibility (OBR) predicts GDP will drop by 11 per cent this year – the largest fall in 300 years.
“Our economy out put is not expected to return to pre-crisis levels untiul te 4th quarter of 2022,” he said.
“The economic damage is likely to be lasting….long-term scarring means in 2025 the economy will be 3 per cent smaller than expected in the March Budget.”
12.50 Covid spending up to £280bn
Sunak starts the speech by saying that spending on the Covid response will lift to £280bn after the new spending review.
He says the priority is “jobs, businesses and public services”.
“It delivers a once in a generation investment in infrastructure, creating jobs, growing the economy, increasing pride in the places we call home,” he said.
12.44 Moments away from kick off
We’re just moments from getting underway now as the chancellor enters the House of Commons.
12.18 Sunak emerges from Number 11
And he’s off!
Sunak has left 11 Downing Street brandishing the text of his comprehensive spending review.
A little less razzle dazzle today than the lead up to his “winter economic plan”, which saw him pose with the heads of the Trades Union Congress and CBI in front of Number 11.
12.07 Former cabinet minister says aid budget to be slashed
Former international development secretary Andrew Mitchell has just said he believes the 0.7 per cent of GDP target for foreign aid will be cut today.
Mitchell also told Sky News that it would be “a very serious mistake” and “something we simply shouldn’t do”.
It has been rumoured that any cut to the government’s aid budget will spark a resignation from foreign office minister Baroness Liz Sugg.
11.30 Rishi’s tie and hoodie combo
The chancellor received flak on social media last night for releasing a photo wearing a hoodie over his shirt and tie.
Sunak got the nickname “dishy Rishi” after a picture of him wearing a hoodie in his study was released earlier this year, but has his team tried too hard to create the magic this time around?
Many have compared the new look to a sixth former studying for A levels.
11.18 Will retirees be squeezed in today’s spending review?
It has been speculated that the chancellor will cost investors £100bn by announcing a change to how pensions are calculated in the comprehensive spending review.
The Telegraph reports that Sunak is considering linking pension rises to CPI instead of the retail price index, which would mean smaller yearly increases.
The change would mean that 10m retirees will receive smaller pensions than they had previously planned.
However, industry experts warn it will cost investors in index-linked gilts – bonds tied to inflation – around £100bn.
11.05 ‘Tens of billions’ on infrastructure
The Treasury also said last night that Sunak would announce “tens of billions” of pounds of new infrastructure projects.
This is expected to consist of a tranche of road, green energy and housing projects as a part of the government’s agenda to “level up” the Midlands and the North.
Another thing to look out for is if Sunak cuts the government’s commitment to spend 0.7 per cent of GDP each year on foreign aid.
It has been speculated in recent weeks that this will be cut to 0.5 per cent, with ministers saying publicly last week that the figure could be reduced.
11.01 Welcome to City PM’s spending review live blog
Rishi Sunak is up in the House of Commons at around 12.45pm to deliver his spending review, which will include billions of pounds of new funding.
The Treasury trailed yesterday that Sunak will spend £4.3bn on new unemployment programmes, including a new Restart scheme to help people find work.
Almost 1m Britons have lost their jobs during the pandemic, with this expected to rise dramatically when the furlough scheme ends next year.