RISHI Sunak has warned 2.6 million people will be unemployed by next year – and the economy won’t recover until 2022.
The Office for Budget Responsibility gave a grim forecast that Britain’s debt will tot up to almost £400billion by the end of the year because of the coronavirus crisis – and will hold at £100bill until at least 2024.
The Chancellor said the OBR’s figures laid bare the full scale of the “economic emergency” facing the UK as he tried to slash spending to balance the Treasury’s books in the spending review today.
Mr Sunak said despite the Government’s best efforts to keep people in work with recording spending on schemes such as furlough, unemployment will soar by 7.5 per cent – or 2.6million people – over the next year.
He said: ” Despite the extraordinary support we’ve provided, the OBR expects unemployment to rise to a peak in the second quarter of next year, of 7.5% – 2.6m people.
“Unemployment is then forecast to fall in every year, reaching 4.4% by the end of 2024.”
The OBR said the UK’s economic output has plunged to it’s lowest level in 300 years – and it won’t return to pre-pandemic levels until the very end of 2022.
Even by 2025, the economy will still be 3 per cent smaller than forecast before full brunt of the Covid crisis hit.
Britain’s borrowing bonanza will hit the equivalent of 19 per cent of GDP – the highest ever recorded level in peactime.
By next year, borrowing is set to fall by £164 billion – but by 2024 Treasury will still be taking on £100billion of debt.
Overall debt will continue to jump every year of the OBR’s forecast – eventually hitting 97.5 per cent of GDP in 2025-2026.
In a gloomy statement he told MPs and the nation:
- The Government is on track to dish out a huge £280bn to get our country through coronavirus this year alone – and £18billion is planned for next year
- Unemployment will rise to a peak of 7.5 per cent – 2.6million people – by the second quarter next year
- NHS staff to get pay RISE but millions of public sector workers face pay freeze
- 2million will get a National living wage hike to £8.91 an hour
- Foreign aid will be cut to 0.5 per cent of GDP next year – but he hopes to raise it back again afterwards
- A £4billion ‘levelling up’ fund to help areas in the North hit hardest by the pandemic
- Day to day public spending is up overall in real terms by 3.8 per cent, or £14bn more
- Manifesto promises kept on schools, hospitals and police funding
Mr Sunak said: “High as these costs are, the costs of inaction would have been far higher.
“But this situation is clearly unsustainable over the medium term.
“We could only act in the way we have because we came into this crisis with strong public finances.
“And we have a responsibility, once the economy recovers, to return to a sustainable fiscal position.”
In his spending review, Mr Sunak laid out a raft of cost-cutting measures including freezing public sector pay and cutting the foreign aid target from 0.7 per cent to 0.5 per cent.
The combination of the two measures could save almost £10billion but both face fierce criticism.
Mr Sunak has had to dish out record sums to keep Britain afloat during the coronavirus crisis.
Last month, he extended the furlough scheme to last through until March as Boris Johnson warned the UK faced a “hard winter” of further coronavirus restrictions.
In the financial year to October, the OBR said the Government had borrowed a staggering £214.9 billion.
CUT COSTS
Money flowing into Treasury coffers has also dried up, with the amount of cash from tax falling by £38.3 billion as Mr Sunak introduced massive savings on businesses rates and slashed VAT.
Mr Sunak stressed the Treasury will need to find ways to bring back the long-term health of public finances.
But both the PM and the Chancellor have dismissed suggestions it will signal a return to austerity.
