Chancellor Rishi Sunak pledges almost £1bn of extra funding for NI - but warns that Covid will cause ‘lasting damage’ to the UK

Northern Ireland is to receive almost £1bn of additional funding to deal with the economic devastation caused by Covid, the Chancellor Rishi Sunak has announced.
The Chancellor delivers his spending reviewThe Chancellor delivers his spending review
The Chancellor delivers his spending review

Delivering his spending review in the House of Commons, Mr Sunak said that through the Barnett formula, Scottish Government funding will increase by £2.4 billion and Welsh Government funding by £1.3 billion, with £0.9 billion for the Northern Ireland Executive.

But he warned that the economic emergency caused by coronavirus has only just begun and there will be “lasting damage” to the UK.

Hide Ad
Hide Ad

Official forecasts showed the UK economy was expected to shrink by 11.3% this year, the worst recession for more than 300 years.

The Chancellor told MPs that the Office for Budget Responsibility did not expect the economy to return to its pre-crisis levels until the end of 2022 and the damage was likely to last.

The “long-term scarring” would mean that in 2025 the economy will be around 3% smaller than expected in March.

Mr Sunak said: “Our health emergency is not yet over. And our economic emergency has only just begun.

Hide Ad
Hide Ad

“So our immediate priority is to protect people’s lives and livelihoods.”

The OBR forecasts show a recovery is expected over the coming years, with growth of 5.5% forecast next year as coronavirus restrictions are eased, then 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 and 1.85 in 2025.

The Government will borrow an eye-watering £394 billion this year, equivalent to 19% of GDP – the highest ever recorded in peacetime.

Although borrowing will subsequently fall, the national debt is forecast to reach 97.5% of GDP in 2025-26.

Hide Ad
Hide Ad

“This situation is clearly unsustainable over the medium term,” Mr Sunak admitted.

While Mr Sunak continued to allocate large sums to tackling the ongoing emergency he confirmed there would be restraint in pay awards for public sector workers and a cut in overseas aid.

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

Over a million nurses, doctors and others working in the NHS will get a rise but pay rises for the rest of the public sector will be “paused” – except for the 2.1 million workers earning below the median wage of £24,000, who will receive an increase of at least £250.

Hide Ad
Hide Ad

The cut to the aid budget sees the Government reneging on a legal pledge and manifesto commitment to spend 0.7% of national income on development assistance.

Mr Sunak said: “Sticking rigidly to spending 0.7% of our national income on overseas aid, is difficult to justify to the British people, especially when we’re seeing the highest peacetime levels of borrowing on record.”

Instead of the existing target, Mr Sunak said 0.5% would be spent in 2021, around £10 billion.

The Government faced condemnation from charities and criticism from senior Tories about the move.

But Mr Sunak insisted that “at a time of unprecedented crisis government must make tough choices” and promised that spending would return to 0.7% “when the fiscal situation allows”.