Rishi Sunak revealed the true cost of the coronavirus pandemic to the economy in his Winter Spending Review speech today.

The chancellor announced the UK will have to borrow £394 billion by this end of this year, after the Cabinet was warned the true extent of the economic impact makes a ‘sobering read’.

It comes as Mr Sunak pledged to make jobs his ‘number one priority’ in the wake of the pandemic in the Commons this afternoon.

Unemployment is expected to peak at 7.5% in the second quarter of 2021 – 2.6 million people – the Office for Budget Responsibility says.

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He said the Government is providing £280 billion to get the country through the Covid-19 crisis.

‘Next year, to fund our programmes on testing, personal protective equipment and vaccines, we are allocating an initial £18 billion,’ he told MPs.

‘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.

‘Taken together, next year, public services funding to tackle coronavirus will total £55 billion.’

The chancellor insisted he is not planning a return to ‘austerity’, but warned ‘our economic emergency has only just begun’.

Mr Sunak announced the launch of a three-year ‘Restart’ programme, worth £2.9 billion. It aims to help more than a million unemployed people get back into work over the coming months and years.

He also promised £1.4 billion to increase the capacity of Jobcentre Plus, and a £375 million skills package.

Other commitments include £3 billion more to support the NHS, including £1 billion to address the treatment backlogs built up during the first wave of the crisis.

Another £1.6 billion will be invested into local roads, as part of the publication of the much-delayed National Infrastructure Strategy.

Rebuilding public finances

But the chancellor also revealed steps towards rebuilding the public finances due to the huge amount of money borrowed to get the country through the first part of the pandemic.

Official figures last week showed public sector debt had passed the £2 trillion mark for the first time in UK history.

To try and reduce this debt, Mr Sunak will freeze public sector pay. Wages for more than four million workers will be capped or frozen altogether, but NHS doctors and nurses will be exempt from this.

And 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.

He will also scrap a planned 5% increase in the national living wage.

As a result Mr Sunak is braced for a backlash from trade unions, who claim public sector workers bore the brunt of austerity cuts after the global financial crash.

But Mr Sunak argues the private sector has been hit the hardest in the pandemic.

Cuts to aid

He also announced he is cutting the overseas aid budget to 0.5% of national income.

The cut, although criticised by some senior Conservatives, is estimated to wipe around £4 billion from the overall budget, depending on the level of national income.

Former Prime Minister David Cameron, who enshrined the 0.7% commitment in UK law, called Mr Sunak’s move a ‘strategic mistake’.

In 2019 the total aid budget was £15.2 billion – but as the target is linked to the health of the economy, the amount for 2020 will be lower.

Foreign secretary Dominic Raab has already set out a £2.9 billion package of aid cuts.

Because of the economic uncertainty caused by Covid-19, most Government departments will now only receive a one-year spending allocation rather than the usual multi-year settlement.

An exception has been the Ministry of Defence, which was awarded a four-year deal to modernise Britain’s armed forces in a deal reportedly worth £16.5 billion.

Shadow chancellor Anneliese Dodds said the country is facing a ‘jobs crisis’ as a result of the Conservative Party’s ‘irresponsible choices’ and economic mismanagement.

‘They clapped for key workers – but now they’re freezing their pay, and looking to scrap planned minimum wage increases for the private sector,’ she said.

‘That will hit people’s pockets and pull spending out of our small businesses and high streets when many are already on their knees.

‘We need a relentless focus on jobs and growth to get the economy back on its feet.’

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