The Chancellor has insisted Britain is not turning its back on the world’s poorest people as he defended the Government’s plan to cut the foreign aid budget amid a growing Tory backlash.
Rishi Sunak admitted it was a “difficult decision” to slash overseas aid from 0.7% to 0.5% of gross national income (GNI), but said the UK is in the midst of an “economic emergency”.
A number of prominent Conservatives have publicly expressed concern at the move, announced in Wednesday’s Spending Review, which reneges on a manifesto commitment.
Foreign Office minister Baroness Sugg quit in protest against the plan, while former international development secretary Andrew Mitchell said the change will cause “100,000 preventable deaths, mainly among children”.
But in an interview with Sky News, Mr Sunak said: “I don’t think anyone could characterise our level of support for the poorest countries as turning our back.
“We’ll be spending more as a percentage of GDP than France, Canada, the US, Japan.”
GNI in 2019 was £2.17 trillion, meaning a drop from 0.7% to 0.5% would account for more than £4 billion.
The overseas aid cut was one of a number of measures outlined in the Spending Review intended to help cope with the economy contracting by an expected 11.3% this year.
Mr Sunak also announced what amounted to a pay freeze for an estimated 1.3 million public sector workers, and sought to defend the policy on Thursday morning.
He said there was a “disparity” between the public and private sectors going into the coronavirus crisis, and “even when you take into account characteristics and pensions, there was at least a 7% pay premium for public sector”.
He told Sky: “That pay premium has certainly widened in the last six months, because what we’ve seen over the last six months is private sector wages have fallen by a percent and public sector wages have risen by around 4%.
“On top of that, people in the private sector are losing their jobs, their hours are being cut, they are being furloughed – none of that is happening in the public sector.
“So given the context, I couldn’t justify an across the board, universal pay increase for the public sector.”
Shadow chancellor Anneliese Dodds said Mr Sunak had a chance in the Spending Review to put confidence back into the economy.
But she told ITV’s Good Morning Britain: “What did he choose to do instead? Well he hit people’s pockets, he decided to, yes, focus that pay freeze on police and on teachers.
“Now that means they’re not going to be spending in our high streets.”
The Chancellor told MPs on Wednesday the economy is not scheduled to recover to pre-crisis levels until the end of 2022.
Emergency measures will see the Government borrow £394 billion this year, which amounts to 19% of Gross Domestic Product (GDP), a measure of the size of the economy – the highest ever recorded in peacetime.
However, Institute for Fiscal Policy (IFS) head Paul Johnson questioned whether even more borrowing than that signalled by the Government will be needed.
He tweeted: “SR (Spending Review) assumes zero spending on Covid after next year. It assumes Universal Credit is cut in April. It assumes non-Covid spending will be £10bn p.a. less than expected in March.
SR assumes zero spending on Covid after next year. It assumes Universal Credit is cut in April. It assumes non-Covid spending will be £10bn p.a. less than expected in March.
Not sure any of these will happen. Implying quite a lot more borrowing even than the £100bn forecast
— Paul Johnson (@PJTheEconomist) November 25, 2020
“Not sure any of these will happen. Implying quite a lot more borrowing even than the £100bn forecast.”
Torsten Bell, chief executive of the Resolution Foundation think tank, said the Chancellor “quietly dialled down his spending plans beyond the crisis” in the Spending Review.
“For all the talk of ending austerity, its legacy will continue for many public services throughout the parliament.
“While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future. But which taxes those will be, like which Brexit we can expect, are questions the Chancellor left for another day.”
Mr Sunak declined to comment on any future tax rises during his morning interview round on Thursday.