While delivering the government’s spending review for 2020, UK chancellor Rishi Sunak cautioned that the “economic emergency” caused by the COVID-19 pandemic was just beginning.

“Our health emergency is not yet over and our economic emergency has only just begun,” he said, adding that his priority was to “protect people’s lives and livelihood”.

The chancellor’s warning came as the Office for Budget Responsibility estimated that the UK economy will contract by 11.3% by the end of 2020, the country’s largest recorded fall in output for 300 years. Unemployment is also expected to peak at 2.6 million in 2021 and remain above pre-pandemic levels until 2024 at the earliest.

Chancellor Sunak said that departmental spending would be £540 billion next year, up 3.8%. He also promised a “once in a generation investment in infrastructure” towards schools, hospitals and roads, which the government would spend £100 billion on next year. £3 billion in additional funding will be earmarked for the NHS. Government borrowing will rise to almost £400 billion, reaching its highest level outside of wartime, to finance these projects.

The government’s foreign aid budget will also be cut, and there will be a “targeted” pay freeze on public sector workers, the chancellor said, from which the NHS and lowest paid workers will be exempted.

In other news of note from the spending review, the chancellor said that he had accepted the Low Pay Commission’s recommendation that the minimum wage – now rebranded as the National Living Wage – be increased by 2.2% up to £8.91 per hour. It will also be extended to those aged 23 and over, down from the current age of 25, and the minimum age for younger workers will be increased as well.


"The chancellor will need to find £20 billion to £30 billion in spending cuts or tax rises if he wants to balance revenues and day-to-day spending, and stop debt rising by the end of this parliament,” noted Richard Hughes, chairman of the Office for Budget Responsibility, following the spending review.