RISHI Sunak this morning warned his colleagues in the UK Cabinet that the report on the country’s economic outlook was a “sobering read”.
The Chancellor, who will deliver his Spending Review statement to MPs this afternoon, will announce a £4.3 billion spending splurge with the aim of protecting jobs and trying to get one million people back into work.
However, the economic forecast by the Office for Budget Responsibility, the Government’s independence forecaster, is set to dominate proceedings. One source described its contents as “scary”.
A No 10 spokesman, noting how Mr Sunak had updated Cabinet colleagues ahead of his set-piece statement, said: “Cabinet was told the OBR forecasts will show the impact the coronavirus pandemic has had on our economy and they will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels.
“But – as the IMF, OBR and others have pointed out – the costs would have been much higher had we not acted in the way we have done.”
He explained the Chancellor set out how the Government had three key priorities for this year’s spending review:
*to protect people’s lives and livelihoods providing the support they need to get through Covid;
*to make good on the Government’s promise to deliver strong public services by investing in schools, hospitals our police force and more and
*to deliver record investment plans in infrastructure to level up and spread opportunity across the United Kingdom.
“Our plan is to deliver the highest sustained levels of Government investment in almost half a century. The PM said that the Government would work tirelessly on job creation, driving economic recovery and building back better,” added the spokesman.
Mr Sunak’s focus today will still be on dealing with the economic emergency caused by the pandemic and the multi-billion pound investment programme to aid Britain’s recovery. Tax announcements are due to come next year or the year after; or both.
However, while the Chancellor has insisted he will not be announcing a return to austerity today, it has been widely speculated that he will impose a pay freeze on millions of public sector workers – NHS frontline staff excepted – introduce a cut to overseas aid – which would break a manifesto pledge and might even lead to a ministerial resignation - and recalibrate inflation from RPI to the lower CPIH, which will hit savers and pension pots.
Since the beginning of the financial year in April, Government borrowing has reached £215bn, £169n more than a year ago.
The OBR has already estimated it could reach £372bn by the end of the financial year in March 2021.
A big focus of Mr Sunak’s spending review will be to create, protect and support jobs as the unemployment rate is set to rise sharply.
The latest official numbers show an estimated 1.6m people were unemployed in the three months to September, up 318,000 on a year ago. The unemployment rate currently stands at 4.8 per cent of the workforce but, in its latest forecast, the Bank of England suggested the rate could peak at around 7.75% in the second half of 2021.
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