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Rishi Sunak will set out on Wednesday a £ 4.3 billion plan to address the threat of mass unemployment as the chancellor prepares Britain for the brutal economic consequences of the coronavirus crisis.
Mr. Sunak will tell MPs in his spending review that his “number one priority is protecting jobs and livelihoods.”
The chancellor must say that now is not the right time to begin fiscal consolidation, even as he publishes what government officials admitted were “terrifying” new forecasts showing the economic destruction caused by the Covid-19 pandemic.
Forecasts from the Office of Budget Responsibility are expected to show much higher unemployment and unsustainable public finances.
The British fiscal watchdog will warn that after the Covid-19 production plummeted this year, with huge public spending and low tax revenue, public finances will remain under pressure at the time of the next general election in 2024. Debt the UK public in August exceeded £ 2 trillion.
Officials suggested that the forecasts will show a hole of around £ 40bn in finances to be covered by higher taxes or an unexpectedly strong recovery from the economic downturn.
Prime Minister Boris Johnson has ruled out a return to “austerity” in public spending and on Wednesday Sunak will announce tens of billions of pounds of capital investment aimed at creating jobs through road and housing construction and through green energy plans.
Sunak wants to give the private sector time to recover before it begins to recoup some of the money spent during the pandemic. Tax increases are expected in your Budget next year.
But he will take the first modest steps to curb spending on Wednesday, laying down plans to save roughly £ 4bn a year from the foreign aid budget, along with a public sector pay freeze that could secure £ 4bn after three years. NHS staff will be exempt.
Mr Sunak is expected to claim that the cuts in foreign aid reflect the “priorities” of ordinary Britons, while the public sector pay freeze is “fair” because it reflects strict pay agreements in the private sector.
Aides to the chancellor said “jobs, jobs, jobs” would be at the center of his spending review, which will establish one-year spending totals for most government departments, while trying to avoid mass unemployment.
The latest official statistics show an estimated 1.6 million people were unemployed in the three months to September, 318,000 more than a year earlier. The unemployment rate stands at 4.8 percent of the workforce.
As many companies go ahead with their layoff plans, unemployment is projected to rise further in the coming months.
The Bank of England said in its latest forecasts, made after the chancellor announced the extension of the government’s leave plan through March, that unemployment could peak at about 7.75 percent in the second half of 2021.
Sunak will announce £ 2.9 billion of spending over three years on a ‘reset’ program to help Britons find work, plus £ 1.4 billion of new funding to increase the capacity of the Jobcentre Plus network to help more people to go back to work.
The Restart program, which offers regular and intensive “personalized” job support, is especially aimed at older workers who are more likely to face the “healing effects” of long-term unemployment.
“We were slow to address this problem after the 2008 financial crisis,” said a Treasury source. “This time we want to tackle the problem early, avoiding the effects on livelihoods, families and mental health.”
The injection of £ 1.4 billion to expand Jobcentre Plus’ capacity will go some way to reversing the cuts made since 2015.
The £ 2.9 billion restart plan, which will offer intensive work support to people who have been out of work for more than 12 months, is almost a replica of a work program implemented by the coalition government.
The Department for Work and Pensions released an evaluation of that program on Tuesday showing that a model in which private sector providers were paid based on job performance had led people to spend less time on benefits and more. time to work, although there was still a sizable group that did neither.
Stephen Evans, director of the Learning and Work Institute, a research body, said a new version of the work program would have to be more locally adapted and better integrated with skills support.
“While effective employment support is vital. . . it must be part of a broader plan for the economy to work again, restarting growth and supporting job creation, “he added.
