express– The Chancellor will use a financial statement next week to pledge his commitment to “levelling up” the country with a massive cash injection. A northern headquarters for the Treasury will open next year as part of the government’s plans to move 22,000 civil service roles out of London and the south east by 2030. Rishi Sunak warned on Friday night the UK’s finances will need to be put on a “sustainable path” after public sector debt passed the £2 trillion mark for the first time in history.
But he insisted the pandemic will not throw the Government’s plans to boost the economy outside the south east off course.
Mr Sunak said: “We are absolutely committed to levelling-up opportunities so those living in all corners of the UK get their fair share of our future prosperity.
“All nations and regions of the UK have benefited from our unprecedented £200 billion Covid support package.
“And after a difficult year for this country, this Spending Review will help us build back better by investing over £600 billion across the UK during the next five years.”
Around £1.6 billion will be earmarked for local roads next year, including filling potholes, congestion pinch-points and other upgrades.
Pilots for the UK Shared Prosperity Fund, which will channel funding in left-behind places such as coastal communities and former industrial heartlands, will receive £220 million.
The Government will also publish its National Infrastructure Strategy, which will include targeted investments in transport, digital infrastructure, housing, energy and going green.
Coronavirus has left a gaping hole in public finances after the Treasury turned on the spending taps to prop up the economy and protect jobs.
No 10 insisted there will not be a return to austerity of the past and departmental spending will increase above inflation.
But public sector pay freezes are being considered for millions of workers as the Government tries to rebuild the country’s finances.
The Chancellor is looking at capping rises at or below inflation but frontline NHS doctors and nurses are expected to be exempt in recognition of their work during the coronavirus pandemic.
Mr Sunak said in July that public sector pay awards would need to take account into the wider economic context and said there would have to be restraint.
But he faced a backlash from union leaders on Friday who threatened industrial action if a cap is imposed.
Mark Serwotka, general secretary of the Public and Commercial Services union, said: “If Rishi Sunak fails to pay public sector workers properly, there will be widespread anger and industrial action cannot be ruled out.”
Rehana Azam, national officer of the GMB union said: “We will not stand by and allow public sectors workers to pay for this crisis with new austerity and a morale-sapping wage freeze. “This is a kick in the teeth for those who have been fighting the pandemic.”
TUC general secretary Frances O’Grady said: “A pay freeze would be a bitter pill for care workers, refuse collectors, emergency workers and all the key workers in the public sector who have helped keep the country going through this pandemic.”
But the Centre for Policy Studies said private sector workers had suffered far more from the economic impact of the disease.
It said that a three-year pay freeze across the public sector could save up to £23 billion, helping to plug the hole in the public finances opened up by the pandemic, or £15.3 billion if the NHS is excluded.
Mr Sunak is also looking at reducing aid spending from 0.7 per cent to 0.5 per cent for a year in the spending review.
Government borrowing reached a record £22.3 billion last month, the highest October level since records began in 1993.
The Office for National Statistics said borrowing for the first seven months of the financial year is now estimated at £214.9 billion – the highest in any April to October period on record.
The UK’s debt is now more than 100 per cent of national income for the first time since the early 1960s.
Mr Sunak said: “We’ve provided over £200 billion of support to protect the economy, lives and livelihoods from the significant and far-reaching impacts of coronavirus.
“This is the responsible thing to do, but it’s also clear that over time it’s right we ensure the public finances are put on a sustainable path.”
Economists at the Resolution Foundation think tank predict a GDP hit lasting into the middle of the decade worth £1,000 for every adult in Britain.
It expects the Office for Budget for Responsibility will upgrade the economic outlook for 2020 on Wednesday but the forecast will show it is shrinking by the highest level in 300 years.
Torsten Bell, Resolution Foundation chief executive, said: “Far from being a V-shaped crisis, the economic scars from Covid will be with us at least until the middle of the decade, with the economy set to be permanently smaller by £1,000 per adult.”