Spending review 2020: what did Chancellor Rishi Sunak say about the government’s budget for next year?

The Treasury’s comprehensive spending review outlined plans for a public sector pay freeze - and a cut in overseas aid contributions

Rishi Sunak has warned the UK's "economic emergency has only just begun" in the wake of the coronavirus outbreak, as the chancellor delivered his spending review.

Mr Sunak revealed in his address to MPs on Wednesday 25 November, that the government had already spent £280 billion on combating the Covid pandemic during an "unprecedented crisis" and that "tough decisions" had to be made.

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He confirmed a public sector pay pause next year, excluding frontline NHS doctors and nurses, and even a £250 pay rise for public sector workers who earn less than £24,000 per year.

Chancellor of the exchequer Rishi Sunak announced his spending review on 25 November. (Pic: Getty Images)

Yet there were bleak forecasts for the economy, unemployment rates and confirmation that the UK's overseas aid budget will be cut from 0.7% of the gross national income to 0.5%.

Will there be a public sector pay freeze?

Mr Sunak said the government "cannot justify significant across the board pay rise for public sector workers".

In an effort to offer fairness between private and public pay he outlined a public pay freeze next year but promised the majority of public sector workers will see their pay increase.

That is due to the scheduled pay rises for frontline NHS staff, which will remain, and a £250 increase for 2.1 million public sector workers who earn under £24,000.

By how much is unemployment expected to rise?

The economic fallout of the pandemic has already begun with rising levels of unemployment, which is expected to peak at 2.6 million people next year.

Mr Sunak said unemployment was lower than the comparative rates in Italy, Canada and the US but that it would peak in the UK at 7.5% in late 2021.

There will be a 2.2% increase to the national living wage, of 18p, which takes the hourly rate to £8.90, Mr Sunak announced as he looked to show the government was not returning to austerity.

Meanwhile a new £3 billion restart programme has been designed to help more than a million people who have been unemployed for over a year find new work.

What is the forecast for the economy?

The economy is forecast to contract by 11.3% - the largest fall in output in 300 years - and isn't expected to return to pre-pandemic levels until the end of 2022, Mr Sunak said.

It will steadily improve year on year, yet the chancellor warned of lasting long-term damage and that even by 2025 the economy will be 3% smaller than expected before the pandemic hit.

What about overseas aid?

The UK's contribution to overseas aid will reduce from 0.7% to 0.5% next year, pointing to the devastating impact the coronavirus crisis has had on the public purse.

Mr Sunak did say the amount will increase back up to 0.7% when the "fiscal situation allows".

What funding will Scotland get?

Mr Sunak pledged an extra £2.4 billion for Scotland in an uplift through the Barnett formula, including £1.3 billion earmarked to combat Covid.

The chancellor said Wales will receive an additional £1.3 billion and Northern Ireland a further £0.9 billion.