No-deal would hammer economy, warns OBR as minister quits over foreign aid cut

Foreign Office minister quites in protest at cut in overseas aid budget

Boris Johnson takes PMQs ahead of Rishi Sunak's coronavirus spending plan

Rishi Sunak has announced that the "economic emergency" caused by the pandemic has only just started, while a no-deal Brexit would make the blow even worse, according to the Office for Budget Responsibility (OBR). 

The official forecaster warned that unemployment levels could reach 8 per cent, rather than the 7.5 per cent it currently predicts, if the UK does not reach a free trade deal with the EU. 

The OBR also said that 2 per cent could be knocked off GDP growth without an agreement. 

Among the major announcements in Wednesday’s spending review, Mr Sunak said that some public-sector workers would have their salaries frozen next year and that the overseas aid budget would be cut to 0.5 per cent of national income, a decision that was met with protest from the opposition benches. 

The cut to the foreign aid budget led to the resignation of Baroness Suggs, a Foreign Office minister. 

“I believe it is fundamentally wrong to abandon our commitment to spend 0.7% of gross national income on development. This promise should be kept in the tough times as well as the good,” she wrote in her resignation letter to the prime minister. 

See what was our live coverage below.

Key Points

• Tory minister quits over foreign aid budget cut 
• No-deal Brexit would make economic woes worse, warns OBR
• ‘Economic emergency’ only just beginning, says Sunak
• Chancellor warns of ‘sobering’ news on UK economy
• ‘Hostile environment’ broke law, report finds
• Biden says Brexit must not threaten peace in Ireland 

[25 November 2020 12:46 · Rory Sullivan]

PM says UK will still provide for ‘neediest’ around the world

Boris Johnson has said at PMQs that the UK will continue to provide for the "poorest and neediest people in the world".

The prime minister was replying to a question from the SNP’s Westminster leader Ian Blackford about the overseas aid budget, which is likely to be cut during today’s spending review. 

Mr Johnson said: "I think this country can be incredibly proud of what we have delivered for the poorest and neediest people in the world, that will continue... on any view this country is one of the biggest... donors overseas in all its form; I think we're the second-biggest in the G7 on any view, whether in percentage terms or in cash terms and that will continue."

As the prime minister seemed to agree with him about the importance of aid, Mr Blackford expressed hope that reports about the slashing of the overseas aid spending are wrong. 

[25 November 2020 12:53 · Rory Sullivan]

Economy not to return to pre-Covid levels until end of 2022, says Sunak

The chancellor Rishi Sunak has said that the UK economy will not return to its pre-coronavirus levels until the fourth quarter of 2022. 

While giving his financial statement in the Commons, Mr Sunak added that figures from the Office for Budget Responsibility (OBR) showed that the economy in 2025 would be 3 per cent smaller than initially forecast in March. 

[25 November 2020 12:58 · Rory Sullivan]

Government will spend £55billion on public services next year

Rishi Sunak has said that the government will spend a total of £55 billion next year “to get our country through coronavirus”, telling MPs that an initial £18 billion would be put towards vaccine, testing and PPE programmes. 

The chancellor added that £3 billion would be given to help the NHS recover, while £2 billion would be allocated to transport services. 

He added: “And while much of our coronavirus response is UK-wide, the Government is also providing £2.6 billion to support the devolved administrations in Scotland, Wales and Northern Ireland.”

Here’s Andrew Woodcock with the details: 

[25 November 2020 13:03 · Rory Sullivan]

UK forecast to borrow £394bn this year, a peacetime record

The chancellor has said during his spending review that the country is set to borrow £394 billion this year as a result of the pandemic.

He said the emergency had prompted “the highest recorded level of borrowing in our peacetime history”, equivalent to 19 per cent of GDP. 

“Borrowing falls to £164 billion next year, £105 billion in 2022/23, then remains at around £100 billion, 4% of GDP, for the remainder of the forecast,” Rishi Sunak added. 

Meanwhile, the UK’s debt is set to rise from 91.9 per cent of GDP this year to 97.5 per cent in 2025/2026.

[25 November 2020 13:14 · Rory Sullivan]

‘Economic emergency’ has only just started, says Sunak

Chancellor Rishi Sunak has said that the UK's "economic emergency has only just begun", with the Office for Budget Responsibility (OBR) suggesting that the economy is not set to recover to pre Covid-19 levels for another two years. 

The OBR also predicts that the Covid-19 crisis would result in 2.6 million being unemployed next year. 

[25 November 2020 13:19 · Rory Sullivan]

Overseas aid budget to be cut

Around £4 billion will be cut from the overseas aid budget next year, Rishi Sunak has said. 

As predicted, the chancellor announced that the government will be cutting the budget down to 0.5 per cent of national income from 0.7 per cent.

This was met with cries of “shame” and “terrible” from the opposition benches. 

[25 November 2020 13:33 · Rory Sullivan]

Sunak’s spending review

[25 November 2020 13:45 · Rory Sullivan]

Labour criticise public sector pay freeze announced by Sunak

Labour has condemned the government’s decision to freeze the pay of some public sector workers as a “sledgehammer” blow. 

Rishi Sunak told MPs that nurses and doctors in the NHS and the 2.1 million public sector employees who earn less than £24,000 would see pay increases next year, but that other public sector workers would have their salaries frozen. 

As such, the chancellor said the “majority” of public sector workers would earn more money in 2021 than they did this year. 

However, the shadow chancellor Anneliese Dodds said the pay freeze would bring a "sledgehammer" blow to consumer confidence. She also accused the government of mismanaging taxpayers’ money on an “industrial scale” this year. 

[25 November 2020 14:09 · Zoe Tidman]

Education unions react to spending review

Education unions have waded into the debate about pay freezes on public sector workers - including  teachers.

Geoff Barton from the Association for School and College Leaders (ASCL) said the union was “deeply disappointed” at the news.

“The government asks more and more of teachers and leaders, and then effectively cuts their pay," the general secretary said. "It should not be surprised if staff decide to leave the profession." 

Paul Whiteman, general secretary of school leaders’ union NAHT, said: "Hard-working public sector workers, who have been on the front line of the pandemic response should not be forced to pay for the recovery out of their own pockets." 

Rishi Sunak said the schools budgets will increase next year by £2.2bn - a funding boost schools were already expecting as part of pre-pandemic plans.

“We are pleased the chancellor has confirmed that the additional investment in schools through to 2023 remains on track following years of real-terms cuts," Mr Barton from ASCL said following the spending review.

“However, any uplift in school funding is being wiped out by the huge cost of Covid safety measures and teacher supply cover which the government refuses to reimburse."

[25 November 2020 14:30 · Zoe Tidman]

And with Brexit looming...

Anneliese Dodds was critical of Rishi Sunak for not mentioning Brexit in his speech, despite the UK set to leave the transition period at the end of this year.

"In less than 40 days, we're due to leave the transition period. Yet the chancellor didn't even mention that in his speech," the shadow chancellor said.

“There's still no trade deal. So does the chancellor truly believe that his government is prepared and that he's done enough to help those businesses that will be heavily affected?”

PA