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 14:40 · Zoe Tidman]

Anger at pay freeze

Rishi Sunak has been accused of playing "divide and rule" after he justified freezing public sector salaries by arguing that pay in the private sector had also collapsed.

The chancellor has faced criticism from unions after announcing the pay freeze, with the PCS general sectretay saying civil servants and other public sector workers “will feel a deep sense of betrayal". 

Jon Stone, our policy correspondent, has the full story:

[25 November 2020 14:48 · Zoe Tidman]

Climate crisis

Ed Miliband has said the climate crisis was “almost invisible” in today’s spending review:

[25 November 2020 14:50 · Zoe Tidman]

‘Attack on working class people’

Labour’s Angela Rayner has also slammed the spending review:

[25 November 2020 15:00 · Zoe Tidman]

Pay freeze

The Independent’s Ben Chu on the pay freeze for public sector workers outside NHS:

[25 November 2020 15:10 · Zoe Tidman]

Recap

In case you missed it, here are some key points from Rishi Sunak’s 2020 spending review:

• Government has spent £280bn this year to help country through coronavirus, Mr Sunak says
• Pandemic likely to have caused ‘long-term scarring’, meaning economy will be around 3 per cent smaller in 2025 than predicted in March budget
• UK is forecast to have highest recorded level of borrowing in peacetime history this year, Mr Sunak says
• Office for Budget Responsibility (OBR) expects unemployment to peak at 7.5 per cent in the second quarter of 2021 - which works out at 2.6 million people
• NHS doctors and nurses will receive a pay rise, while rest of public sectors will have pay freeze
• However, the 2.1 million public sector workers who earn below the median wage of £24,000 will be guaranteed a pay rise of at least £250 next year
• National Living Wage will increase by 2.2 per cent to £8.91 an hour
• The overseas aid budget will be cut to 0.5 per cent of gross national income in 2021

For more, read our political editor Andrew Woodcock’s write-up:

Additional reporting by PA

[25 November 2020 15:24 · Rory Sullivan]

No-deal Brexit would make economic emergency worse, says official forecaster

A no-deal Brexit would lead to higher levels of unemployment in 2021 than are already predicted to occur because of the pandemic, the Office for Budget Responsibility (OBR) has said. 

The official forecaster warned that unemployment would peak at 8 per cent, rather than at 7.5 per cent, if the UK failed to reach a free trade agreement with the EU. 

It would also come with the risk of 2 per cent being knocked off GDP growth next year. 

Ben Chu, The Independent’s economics editor, has all the details: 

[25 November 2020 15:27 · Rory Sullivan]

Sturgeon blasts foreign aid budget cut

Nicola Sturgeon has lambasted the government for reducing the overseas aid budget from 0.7 to 0.5 per cent of the national income. 

In a tweet posted on Wednesday afternoon, Scotland’s first minister suggested the move was made to appease the right wing of the Tory party. 

She added that the decision was “deplorable” and would affect some of the neediest people in the world. 

[25 November 2020 15:35 · Rory Sullivan]

Tory minister quits over cut to overseas aid spending

Baroness Sugg, a minister in the Foreign Office, has resigned over the decision to cut the overseas aid budget, saying the country’s development work was a “source of great pride” for many in the UK. 

In her resignation letter to the prime minister, Baroness Sugg acknowledged the severe challenges the UK is currently facing but added that she believed 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 added. 

[25 November 2020 15:59 · Rory Sullivan]

Conservative MP says she is ‘ashamed’ by foreign aid spending cut

A former Tory Foreign Office minister has said she is ashamed by the government’s decision to reduce the UK’s aid budget, a move that breaches the Conservative’s manifesto. 

After the decision was announced on Wednesday afternoon, Harriet Baldwin told MPs: "I personally feel ashamed that the manifesto pledge we are breaking today is our promise to the world's poorest."

Tom Tugendhat, a Tory MP who serves as chairman of the Commons Foreign, Commonwealth and Development Affairs Select Committee, was more circumspect in his criticism. 

“At a time when aid has never been more needed in extending the perimeter of our public health to countries where otherwise the Covid crisis would run wild surely this is not exactly the right moment to reducing those defences,” he said. 

[25 November 2020 16:57 · Jane Dalton]

Sunak earmarks £55 billion to help fight coronavirus and pay for vaccines

The Treasury has set aside a £55 billion fighting fund for the pandemic, including £6 billion for new vaccines, writes our health correspondent Shaun Lintern: