On 25 November Chancellor Rishi Sunak delivered his latest Spending Review to the House of Commons, and stated that the coronavirus (COVID-19) pandemic has caused 'lasting damage' to the UK economy.
The economy is forecast to shrink by 11.3% this year and is not expected to return to its pre-pandemic size until the end of 2022. Government borrowing is also expected to rise to its highest level ever outside of wartime. The Chancellor revealed that the government has already provided £280 billion to help the UK combat COVID-19, and said that 'the costs of inaction would have been higher'.
Mr Sunak said: 'We have a responsibility, once the economy recovers, to return to a sustainable fiscal position. This is an economic emergency. That's why we have taken, and continue to take, extraordinary measures to protect people's jobs and incomes.'
In the Spending Review, the Chancellor announced a number of measures, including increases to the National Minimum Wage (NMW) and National Living Wage (NLW) rates. The NMW will rise to £8.36 per hour from 1 April 2021, whilst the NLW will rise to £8.91 per hour and will be extended to 23 and 24-year-olds for the first time.
The Chancellor also announced that 1.3 million public sector workers will see their pay frozen in 2021/22; the overseas aid budget will be reduced by £4 billion; and a new £4 billion 'levelling up' scheme that will fund the upgrading of local infrastructure across the UK.