LONDON: Chancellor Rishi Sunak has said that the “economic emergency” caused by Covid-19 has only just begun as he warned the pandemic would deal lasting damage to growth and jobs. Official forecasts now predict the biggest economic decline in 300 years.
According to a BBC report, the UK economy is expected to shrink by 11.3% this year and not return to its pre-crisis size until the end of 2022. Government borrowing will rise to its highest outside of wartime to deal with the economic impact.
The government’s independent forecaster, the Office for Budget Responsibility (OBR) expects the number of unemployed people to surge to 2.6 million by the middle of next year.
It means the unemployment rate will hit 7.5%, its highest level since the financial crisis in 2009. However, fewer jobs are expected to be lost than predicted this summer. Setting out his Spending Review detailing how much would be spent on public services, Mr Sunak said the government was dealing with an “economic emergency”.
He added: “That’s why we have taken, and continue to take, extraordinary measures to protect people’s jobs and incomes.” Mr Sunak confirmed that public sector workers – excluding some NHS staff and those earning less than £24,000 – will have their pay frozen next year.
The chancellor said he could not justify an across the board rise when many in the private sector had seen their pay and hours cut in the crisis. The government has extended its furlough scheme to support jobs and wages until next March.
The shadow chancellor, Anneliese Dodds, criticised the pay freeze. She said: “Earlier this year the chancellor stood on his doorstep and clapped for key workers. Today, his government institutes a pay freeze for many of them. This takes a sledgehammer to consumer confidence.”
Mr Sunak said the government had already spent £280bn to help support the economy through the coronavirus. It will spend a further £55bn next year as part of a package of measures to support the recovery. This includes billions of pounds to help people find jobs.
Rishi Sunak warned that the number of unemployed people in the UK is expected to surge to 2.6 million by mid-2021. In his Spending Review, the chancellor said the UK’s “economic emergency” had “only just begun”.
The government expected to borrow £394bn this year – the “highest” level “in our peacetime history” – he added. The latest figures show 1.62 million people are unemployed, a number which has risen by more than 300,000 since last year, In the House of Commons, Mr Sunak said the government would spend £280bn this year “to get our country through coronavirus”.