No10 warns covid economic report is a 'sobering read' ahead of spending review

25 November 2020, 11:05 | Updated: 25 November 2020, 11:19

Rishi Sunak will unveil the government's spending plans later
Rishi Sunak will unveil the government's spending plans later. Picture: PA

By Asher McShane

No10 has said that the official forecast on how the UK's economy has been damaged by the covid crisis makes for "sobering" reading.

The damage done by coronavirus to the economy and public finances will emerge later as Chancellor Rishi Sunak sets out his plans for the next year.

No 10 admitted ahead of Mr Sunak's Spending Review that the official forecasts from the Office for Budget Responsibility (OBR) make for a "sobering read". The full report will be released after the Chancellor's statement to the Commons this afternoon.

Read more: Spending review- live updates

The Chancellor is expected to pump billions more of taxpayers' money into efforts to support jobs and help the health service cope with the impact of the pandemic.

The OBR has previously estimated the Government will borrow £372.2 billion in 2020-21.

A No 10 spokesman said Mr Sunak and Treasury Chief Secretary Stephen Barclay updated the Cabinet ahead of the Spending Review.

"Cabinet was told the OBR forecasts will show the impact the coronavirus pandemic has had on our economy and they will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels," the spokesman said.

"But - as the IMF (International Monetary Fund), OBR and others have pointed out - the costs would have been much higher had we not acted in the way we have done."

Ministers were told that Mr Sunak's three priorities for the Spending Review, which will set departmental budgets for 2021/22, are protecting lives and livelihoods during the pandemic, investing in public services, and funding infrastructure to help "level up and spread opportunity" across the UK.

Mr Johnson told the Cabinet the Government would "work tirelessly on job creation, driving economic recovery and building back better", the spokesman added.

In his Commons statement, the Chancellor will announce the launch of a three-year Restart programme, worth £2.9 billion, which will help more than a million unemployed people get back into work in the wake of the pandemic.

But while business leaders have welcomed the moves to support jobs, Mr Sunak is braced for a backlash from trade unions over an expected freeze on public sector pay as he begins to repair public finances.

He also faces criticism - including from some senior Conservatives and Nobel laureate Malala Yousafzai - over widely signalled plans to slash billions from the foreign aid budget, suspending the UK's commitment to spend 0.7% of national income on overseas development.

Ahead of his statement, the Chancellor has insisted he is not planning a return to "austerity" and would continue to support the economy as it sought to recover from the pandemic.

Spending Review - key points

- Rishi Sunak promises multi-billion pound package to help hundreds of thousands of people made jobless by the coronavirus crisis back into work

- Significant cuts to public sector pay expected, with wages for more than four million workers capped or frozen altogether. Front line NHS workers exempt

- Chancellor expected to announce he is cutting the foreign aid budget to 0.5% of national income

- Measures to support Boris Johnson's "levelling-up" agenda including infrastructure spending

- Tax rises are not expected to be detailed during the Chancellor's speech today