The winners and losers from Sunak’s Spending Review

Chancellor Rishi Sunak delivered a Spending Review against the backdrop of the coronavirus pandemic and the massive economic downturn it has triggered.

Here are some of the winners and losers from Mr Sunak’s financial statement.

Winners:

– NHS workers and public sector staff earning less than £24,000 a year

More than one million nurses, doctors and others working in the NHS will get a pay rise, despite a wider public sector pay freeze.

Some 2.1 million public sector employees earning below the median wage of £24,000 will also receive at least £250 extra.

The exemption for NHS workers comes after the nation praised the sacrifice of frontline health service workers in light of the pandemic.

A member of the public cycles past an NHS love heart sign in Glasgow (Jane Barlow/PA)

– National living wage earners

People in work will see the national living wage increase by 2.2% to £8.91 an hour – although Government critics point out it had been expected to increase to as much as £9.21.

The minimum wage will also rise.

And to deal with an expected 2.6 million spike in unemployment next year, Mr Sunak outlined a nearly £3 billion Restart programme to help get people back into work.

– Coronavirus outbreak response

The Chancellor said £280 billion was being spent this year on the situation.

Mr Sunak said that next year, some £55 billion is earmarked for public services dealing with the crisis, including an initial £18 billion for testing, personal protective equipment and vaccines.

– Government spending

Overall departmental spending will be £540 billion in 2021-22, a £14.8 billion rise in cash terms.

Chancellor Rishi Sunak leaves 11 Downing Street  ahead of delivering his Spending Review in the House of Commons
Chancellor Rishi Sunak leaves 11 Downing Street ahead of delivering his Spending Review in the House of Commons (Yui Mok/PA)

Over this year and next, day-to-day departmental spending will rise, in real terms, by 3.8% – the fastest rate in 15 years.

– Infrastructure investors

The news that the Government will set up a bank to invest in major infrastructure projects was welcomed by some investors.

The Investment Association said its members are committed to helping to fund the UK’s infrastructure, but added it would like to see more detail in the next Budget.

There seemed to be little in Wednesday’s announcements to confirm earlier reporting that the bank might be a green investment bank.

Nevertheless, the Energy Networks Association said the Government’s ambitions were clear, and that getting to net zero by 2050 would require “significant private investment”.

Losers:

– Public sector workers

The Chancellor said he “cannot justify a significant, across-the-board” pay increase for all public sector workers given the difficulties faced in the private sector.

An estimated 1.3 million public sector workers will see their pay frozen.

This move will negatively impact on firefighters, teachers, the armed forces, police, civil servants, council and Government agency staff.

– The overseas aid budget

Mr Sunak said the international aid budget would be cut from 0.7% of gross national income to 0.5% in 2021.

UK spending on overseas aid, as % of gross national income
(PA Graphics)

Tory former international development secretary Andrew Mitchell said cutting overseas aid in such a way risks causing 100,000 otherwise preventable deaths.

Amid signs of a possible Tory rebellion on the issue, Foreign Office minister Baroness Sugg, whose brief included sustainable development, handed in her resignation from the Government.

The Chancellor said it was the Government’s “intention” to return aid to the 0.7% level when the fiscal situation allows.

– Pubs and other hospitality businesses

The hospitality sector has suffered huge losses during the crisis, with around 600,000 jobs lost and restaurants and pubs having to close their doors for long periods.

UK Hospitality, the sector’s trade body, said that while a minimum wage hike could be great for employees, it could squeeze the restaurants and bars that pay them.

Some had been hoping for more targeted support, such as something to replace the now dropped job retention bonus, which pays employers for bringing staff back from furlough.

The boss of the British Beer and Pub Association, Emma McClarkin, said the lack of action to help pubs was “staggering” and accused the Government of casting them adrift.

– Some small business owners

Many directors of microbusinesses who normally take their pay through dividends, instead of as a salary, have so far fallen through the gaps of the Government’s support schemes, as they do not qualify for furlough.

The Federation of Small Businesses had hoped the Chancellor might announce help for these sole traders. It has designed its own solution called the Directors Income Support Scheme.

“A Government which claims to be pro-enterprise had very little to say today about the importance of business and private sector job creation,” FSB chairman Mike Cherry said.

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