ishi Sunak today unveiled his vision for post-Covid Britain with a £4 billion “levelling-up” fund — but warned unemployment could first hit 2.6 million and borrowing more than £760 billion over four years.
The Chancellor announced the extra billions for better high streets and town centres, new bypasses, upgraded railway stations, traffic-cutting measures, and more libraries, museums, and galleries to seek to ensure all areas of the UK benefits from the nation’s wealth.
In a confident performance that will fuel talk of Mr Sunak’s potential as Boris Johnson’s successor, he unleashed a whole series of spending commitments on three priorities; to deal with the Covid crisis, meeting public services pledges and investing in infrastructure.
However, future generations will almost certainly be left picking up the bill for some of the expenditure given the huge borrowing being built up.
* The independent Office for Budget Responsibility is forecasting that the economy will shrink this year by 11.3 per cent, “the largest fall in output for more than 300 years”. As the restrictions are eased, it is then expected to grow by 5.5 per cent next year, 6.6 per cent in 2022, then 2.3 per cent, 1.7 per cent and 1.8 per cent in the following years
* Britain’s economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022 and “long-term scarring” means that in 2025,the economy will be around three per cent smaller than expected in the March Budget
* Nearly £3 billion will be spent on a new, three-year Restart Programme to help over one million people who have been out of work for over a year to find new work, with unemployment forecast to rise to a peak in the second quarter of next year, of 7.5 per cent, 2.6 million people.
* The overseas aid budget will be cut from 0.7 per cent of national income to 0.5 per cent, risking a furious clash with MPs, five former Prime Ministers, and campaigners. Mr Sunak said: “Our intention is to return to 0.7 per cent when the fiscal situation allows.”
* Now was not the time for tax rises, but the OBR is warning that tens of billions of hikes or cuts in public spending may be needed in coming years. The Chancellor said: “We have a responsibility, once the economy recovers, to return to a sustainable fiscal position.”
* The National Living Wage will increase by 2.2 per cent to £8.91 an hour.
* The NHS will get an extra £3 billion, including £1 billion to address the treatment backlogs built up during the epidemic.
* The Ministry of Defence is getting a boost of more than £16 billion over four years.
* Total Government department spending next year will be £540 billion, with day-to-day departmental spending rising, in real terms, by 3.8 per cent.
Mr Sunak also outlined his hopes for the country and society in future years, which is likely to increase speculation over whether he could one day be heading for No10.
He said: “We in Government can set the direction, better schools, more homes, stronger defence, safer streets. .green energy, technological development, improved roads, enhanced rail. .all investments that will create jobs and give every person in this country the chance to meet their potential.
“But it is the individual, the family, and the community that must become stronger, healthier and happier as a result. This is the true measure of our success.”
He added: “The spending announced today is secondary to the courage, wisdom, kindness and creativity it unleashes. These are the incalculable but essential parts of our future, and they cannot be mandated or distributed by government. These things must come from each of us, and be shared freely, because the future, this better country, is a common endeavour. Today Government has funded the priorities of the British people, now the job of delivering them, begins.”
Mr Sunak also announced £600 million for roads, rail and other housing infrastructure aimed at tackling London’s homes crisis.
The Chancellor unveiled the investment as part of a four-year £7.1 billion National Home Building Fund as he sought to inject hope into a dire set of economic figures on the debt and jobs crisis facing Britain.
The East London Line will get an £80 million boost to “unlock” over 14,000 homes in Southwark and Lewisham.
Shadow Chancellor Anneliese Dodds accused the Government of being too slow in responding to rising unemployment, stressing: “With Britain in the grip of a jobs crisis, there’s no time for delay and no margin for error.”