The UK government has spent £280bn on its response to the coronavirus crisis and intends to spend a further £55bn next year, chancellor Rishi Sunak has told the House of Commons.
Delivering his spending review to the House of Commons, Mr Sunak told MPs: “Our health emergency is not yet over and our economy emergency has only just begun.”
He said that coronavirus spending in 2021 will include £18bn to protect public services most affected by coronavirus, along with £3bn to support NHS recovery, more than £2bn for transport and £3bn for local councils.
“Taken together, next year public services funding to tackle coronavirus will total £55 billion pounds,” the chancellor told MPs.
Looking back over the unprecedented spending triggered by the Covid-19 outbreak, Mr Sunak said the government had spent on “furloughs, support for the self-employed, loans, grants, tax cuts and deferrals, as well as extra funding for schools, councils, the NHS, charities, culture and sport”.
And he added: “Today’s figures confirm that, taken together, we are providing £280bn to get our country through coronavirus.
The UK government will also provide £2.6bn to support the Covid response of devolved administrations in Scotland, Wales and Northern Ireland, he said.
His announcements came as official figures forecast a bleak future for the UK economy.
The coronavirus crisis is forecast to send unemployment soaring, leaving 2.6 million out of work b y the middle of next year.
Overall the UK economy is expected to shrink by 11.3 per cent this year, the worst recession for more than 300 years.
The economy is not predicted to return to pre-crisis levels for another two years.
But the pandemic will leave “long-term scarring” that means that even by 2025 it will still be around 3 per cent smaller than previously expected.
The UK’s underlying debt will also continue to rise every year, reaching 97.5 per cent of GDP in 2025-26, Mr Sunak told MPs.
But he added: “High as these costs are, the costs of inaction would have been far higher.”
He pushed ahead with controversial cuts to the overseas aid budget, even in the face of potential ministerial resignations over the decision.
And he left himself on a collision course with unions after he announced a freeze on pay rises for many public sector workers, although nurses, doctors and others in the NHS will be exempt.
The 2.1 million public sector workers who earn below the median wage of £24,000 will also be guaranteed a pay rise of at least £250 next year.
In a bid to ease criticism from his own backbenchers, he announced a new £4 billion “levelling up” fund to finance local infrastructure improvement projects.
A new UK infrastructure bank, to be headquartered in the north of England, designed to finance major new projects will also be created.
Ministers will also push ahead with a rise in the National Living Wage to £8.91 an hour, an increase of 2.2 per cent.
Shadow chancellor Anneliese Dodds said the Conservative government has “wasted and mismanaged public finances on an industrial scale” during the pandemic.
She said: “Many key workers who willingly took on so much responsibility during this crisis are now being forced to tighten their belts – now – not in the ‘medium chance’ to which the Chancellor refers, now.
“In contrast, there has been a bonanza for those who have won contracts from this Government. Companies with political connections have been 10 times more likely to win Government contracts.”
