Rishi Sunak Says Covid’s Economic Emergency Has Just Begun | Politics

Rishi Sunak has warned Britain that its Covid-19 economic emergency has only just begun after responding to the news of the deepest drop in more than 300 years by pledging 55 billion pounds to tackle the pandemic.

On the day the daily death toll from the virus hit a new second wave peak of 696, the chancellor said that despite borrowing a peacetime record of £ 394 billion this year, he would have to keep spending to protect lives and livelihoods. .

Sunak said his one-year spending plan for the economy included the largest sustained increase in infrastructure investment in four decades and involved more money for housing, railroads, broadband improvements, and Boris Johnson’s green agenda, for a total of £ 100 billion next year.

With unemployment on track to reach 2.6 million by the middle of next year, Sunak allocated £ 3 billion to help the long-term unemployed find work and announced a £ 4 billion “equalization fund” for local projects that they range from new roads to libraries in areas of greatest need.

“Our health emergency is not over yet. And our economic emergency has only just begun, ”Sunak told MPs when he announced that forecasts from the independent Office of Budget Responsibility showed that the UK economy was on track to contract by more than 11% in 2020.

The OBR said that the extension of the licensing scheme through March had saved 300,000 jobs, but even with strong growth over the next two years, it would take until the end of 2022 to regain economic ground lost during the Covid-19 crisis. .

The government’s economic forecasting body added that the permanent damage caused by the pandemic would worsen with a 2% impact on growth if trade talks between the UK and the EU end in failure.

The chancellor said that the £ 280 billion spent to tackle the pandemic in the current financial year would be followed by another £ 55 billion of spending in 2021-22. Additional funding will include £ 18 billion for tests, PPE kits and vaccines; £ 3 billion to help the NHS reduce the backlog of routine cases; and £ 2 billion to subsidize the railways.

Part of the £ 55 billion will be recovered through a cut in the UK aid budget from 0.7% to 0.5% of national income, and a public sector pay freeze that will exclude the NHS and who earn less than £ 24,000 a year.

Sunak’s plans to provide an overall economic boost of £ 40bn do not include any wage subsidy support after the leave plan ends in March or an extension of the one-year £ 20-per-week increase in the announced universal credit at the beginning of the crisis.

Paul Johnson, head of the think tank at the Institute for Fiscal Studies, said: “It seems more likely that spending will end up being significantly higher than stated today, so borrowing in 2024-25 will be considerably higher than the £ forecast. 100 billion. by the OBR. Either that or we have some pretty austere years ahead of us once again, or some big tax increases. “

Sunak said the government had a responsibility, once the economy recovered, to repair the damage to public finances. The OBR said that even the loosest definition of balancing the books would require tax increases or spending cuts of £ 27bn.

Shadow Chancellor Anneliese Dodds accused the government of wasting public money “on an industrial scale” during the crisis and attacked the decision to “stop” wage increases for many public sector workers.

“Key workers who voluntarily took on so much responsibility during this crisis are now being forced to tighten their belts,” he said. “In contrast, there has been a bonanza for those who have won contracts with this government.”

In an investigation into Sunak’s polished public image, Dodds added, “The measure of this administration will not be the number of press releases it issued during this crisis or the number of images it posted on Instagram. It will be the responsible action that he took, or did not take, for the good of our country ”.

Conservative MPs were widely supportive of Sunak’s approach, but a number of senior officials, including former Foreign Secretary Jeremy Hunt and former Development Secretary Andrew Mitchell, were fiercely critical of the decision to ditch the 0.7 aid promise. %.

Hunt warned the chancellor: “Cutting our aid by a third, in a year in which millions more people will fall into extreme poverty, will not only impoverish them, but us in the eyes of the world, because people will care that we abandoning a noble ideal that we in this country have done more to defend than anyone else ”.

The decision prompted the resignation of fellow conservative Liz Sugg from her role as minister of sustainable development. Sugg said it was “fundamentally wrong.”

Sunak said: “This country has always been and always will be open and outward-oriented, leading the solution of the world’s most difficult problems.

But during a national fiscal emergency, when we need to prioritize our limited resources on jobs and public services, it is hard to justify for the British people rigidly sticking to spending 0.7% of our national income on foreign aid, especially when we are seeing the the highest levels of loans recorded in peacetime. “

Labor attacked Sunak’s leveling fund as “pork barrel policy”, pointing to a recent report from the National Audit Office that suggested the government’s £ 3.6 billion municipal fund allocation may have had in part a political motivation.

Downing Street is eager for tangible improvements to show voters in former Labor seats in the Midlands and the North of England that backed the Tories a year ago, and in changing seats that they hope to win in 2024.

Footballer Marcus Rashford, who successfully campaigned for the government to extend food stamps to poorer families during the upcoming Christmas holidays, questioned why Sunak had not announced an extension of the emergency increase of £ 20 a week. in the universal credit that must end. next April. The government has only said that it will review the “health and economic context” in the new year.

“I am very concerned that families are constantly counting down the days until aid is withdrawn. The need for long-term change is huge. Kids can’t meet deadlines, ”Rashford tweeted.