UK politics: minister resigns over aid spending cut; Rishi Sunak freezes public sector pay except for NHS – as it happen

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Rishi Sunak has said the government will borrow a peacetime recor.....ewSparrow.

Early evening summary

And here is an analysis from our colleague Larry Elliott.

  • The UK has recorded 696 further deaths - a new record for the second wave of the pandemic and the highest daily total since early May. (See 5.49pm.) Deaths are always a lagging indicators, and UK case numbers continue to fall, but the figure serves as a reminder of the seriousness of the second wave on the eve of the announcement from the government about which areas in England are going into which tiers when the lockdown ends next week. Some governnment figures have been claiming that the whole of the country could end up in tiers 3 or 2, the two tiers with the strictest rules. This evening the Office for National Statistics has announced that it will publish its weekly coronavirus infection survey, which is regarded as one of the best guides to the prevalance of coronavirus in the community, tomorrow at 10.30am, instead of Friday at 12pm at usual. The govenrment has promised to release data justifying its decisions about which areas are going into which tiers, and that may explain why the ONS publication has been moved forward. In its announcement about the revised release time the ONS said:

Analysis relating to the pandemic is subject to changes at short notice. The ONS is working to ensure the UK has the vital information needed to respond to the impact of the coronavirus (Covid-19) pandemic on our economy and society.

UK dashboard
UK dashboard Photograph: Gov.UK

That’s all from us for tonight. But our coverage continues on our global coronavirus live blog. It’s here.

Updated

What thinktanks say about the spending review

Here is a selection of what some major thinktanks are saying about the spending review.

From the National Institute of Economic And Social Research

There is no immediate reason for concern about elevated public debt resulting from the government’s policy interventions. Interest rates are far lower than at the time of the global financial crisis and are likely to remain low for some time. The maturity of public debt is long, low borrowing costs can and should be ‘locked in’, and – while borrowing this year has principally been domestic – foreign demand for UK government debt remains robust.

The principal exception to the government’s plans to continue fiscal support is the freeze on non-NHS public sector pay, which could save up to £4bn. With pay accounting for nearly a quarter of public spending, this constitutes a negative shock to government consumption and is scheduled to take place next calendar year and earlier than likely tax increases. It departs from common practice in which public wages act as a stabiliser, catching up on the gains made by the private sector during expansions: accordingly the public sector wage premium has largely been eroded over the past decade.

From Caryl Roberts, executive director of the IPPR

With the economy contracting by 11.3% this year, and unemployment set to reach 2.6m by spring, it is essential that the government steps in to shore up spending and economic activity. This is not controversial but basic economics.

Our estimates this week showed a fiscal stimulus of £164bn was needed to support the economy and prevent needless, permanent damage to businesses and incomes. Yet only a little over a quarter of that was committed in announcements today.

The chancellor has acted too timidly, and in doing so has failed to live up to the scale of the challenge. He has missed an opportunity to build not just a stronger economy but one that is fairer and greener. And, ironically, he will find it harder to achieve fiscal sustainability as a result, because tax receipts reflect the state of the economy.

From Torsten Bell, chief executive of the Resolution Foundation

Faced with a grim economic outlook, and an ongoing public health crisis, the chancellor has rightly chosen to double down on Covid spending, which is set to total around £335bn over two years. The British state has never seen anything like this outside of world war two.

But the chancellor less noisily began the process of changing his public finances plans for the years ahead, opting to spend up to £13bn a year less on non-Covid public services than previously planned.

The idea that there will be no permanent increase in spending post-pandemic is what you might politely call optimistic. It is certain that tax rises will end up playing a bigger part in any real plan to put the public finances on a sustainable footing once the recovery is secured.

From Robert Colvile, director of the Centre for Policy Studies

Today’s spending review recognises the extraordinary scale of the government’s fiscal response to the pandemic, but also the extraordinary and long-lasting economic damage that it has inflicted.

It is right to prioritise jobs, health and public services now, rather than immediately closing the deficit, but also right to acknowledge the enormity of the challenges ahead. The temporary cut to international aid and the imposition of public sector pay restraint, both called for by the Centre for Policy Studies, recognised this changed environment - but we are still committed to increasing spending on a shrunken tax base.

UK records 696 further Covid deaths - highest daily total since early May

The UK government has updated its coronavirus dashboard. Here are the key figures.

  • The UK has recorded 696 further deaths - the highest daily total since early May. And there have been 3,261 deaths over the past seven days - a 12% increase on the total for the previous week.
  • The UK has recorded 18,213 further positive cases. That is a big increase on yesterday (11,299) and the day before (15,450) but over the last few weeks the trend for case numbers has shown a clear decline.

Updated

The Association of Directors of Public Health have heavily criticised the government for not raising the public health grant – funding to local authorities to improve community health.

They point out that local public health teams have a key role to play in managing the Covid-19 pandemic, and preparing for future ones - and tackle socio-economic causes of health problems.

Rob Booth reported earlier that care home providers said Sunak had left a “black hole” in social care budgets.

Alex Chapman, from the New Economics Foundation thinktank, has got a useful Twitter thread on the spending review policies for employment. It starts here.

And it includes this.

The latest edition of the Guardian’s Politics Weekly podcast is out. Heather Stewart, Richard Partington and Rafael Behr discuss the chancellor’s spending review, and England’s move from lockdown back to a tiered system. Plus, Peter Walker, Polly Toynbee, and Tim Bale look back through the history of civil wars in the Labour party.

Capital Economics, the respected City consultancy, reckons the OBR’s forecasts are too gloomy, and underestimate the impact that vaccines will have next year.

Their senior UK economist, Ruth Gregory, says the fiscal outlook isn’t as bad as it looks, so it would be counterproductive to withdraw government stimulus too early.

First, we think the projections are underplaying the effect of vaccines on economic activity. Indeed, in our vaccine forecast, rather than return to its pre-virus level in late-2022 as the OBR expects, we suspect the economy will be able to do so by early 2022.

Second, and much more importantly, it is not necessarily the case that there will be a fiscal hole anyway if the economy eventually gets back to its pre-virus level as we think it will. We think the economy would be around 1% smaller in 2024/25 compared to if the pandemic had never happened. That’s closer to the OBR’s upside scenario.

That would allow the deficit to return to close to its pre-virus levels by 2024/25.

Moreover, we expect the economy to get back to its pre-virus trend later in the decade. And low borrowing costs means that the government can take time to let economic growth fill the hole.

OBR chair Richard Hughes has confirmed that the watchdog has the Pfizer and Moderna vaccine trial results when it finalised its report, but not AstraZeneca’s (as we flagged earlier).

The AstraZeneca/Oxford University results are “certainly good news”, Hughes told the OBR’s press conference. But the ‘full fan’ of scenarios (from a rapid vaccine rollout, to no effective vaccine) are equally possible.

Hughes says:

The fact that the Oxford vaccine appears, when you listen to the public health experts, to be more readily rolled out [and] the fact that the government has bought many more doses of this vaccine for distribution to the population means it is more likely to be available earlier, which means it is more likely to allow a resumption of our lives to some semblance of normality sooner.

But huge uncertainly remains, these are all trials, we have yet to see how any of these vaccines perform in the field, he adds.

Sunak delays switch away from RPI inflation measure for index-linked gilts

The spending review included an announcement about inflation rates which will be welcome in the short term by investors and pensioners, but a blow to students and those who use rail services.

Currently the government issues bonds with returns linked to RPI, an old method of measuring inflation which is now considered to overstate price rises. Since March, it has been consulting on replacing the measure with a new one which is calculated differently and includes housing costs, and it had been thought a change could come as early as 2025.

Rishi Sunak instead delayed it until 2030, giving investors an extra five years at the higher rate. But when it comes, the change will have an impact on pension schemes and other investors who hold index-linked gilts. “While the average difference between RPI and CPIH might look small at 0.8 percentage points, over time that could lead to a retirement income worth thousands of pounds less,” says Tom Selby, senior analyst at investment firm AJ Bell.

However, for students, whose loan interest is linked to RPI, and commuters whose rail fares rise in line with it each year, switching to a measure that is typically lower will be good news. They may have hoped for a 2025 change.

From our colleague Heather Stewart

NHS in England gets extra £3bn to tackle operations backlog

The NHS in England has been given £3bn extra next year to tackle the huge backlog of operations cancelled because of Covid and the spike in mental illness caused by the pandemic.

Hospitals will spend around £1bn of the money trying to reduce the number of people who are waiting for non-urgent surgery, such as a hip or knee replacement or cataract removal, and the long waits that are becoming increasingly common. The number of people forced to wait at least a year for elective care has rocketed from 1,500 in February to almost 140,000 in September.

“Our world-class NHS has played a critical role in the response to Coronavirus but we know how desperately difficult and distressing it has been for patients that are waiting to have operations and medical treatment during the pandemic”, said Rishi Sunakin his statement.

The £3bn is much less than the £10bn a year more that the British Medical Association and Health Foundation thinktank has said the service needed to cope with the rising demand for care.

The £1bn will fund the NHS to carry out up to one million more checks, scans and operations on people who could not get treatment in the spring when many non-Covid services were suspended.

Around £500m of the £3bn will go into expanding mental health care for people who could not access help when the pandemic struck. That money will be used to tackle both the backlog of adults referred for mental health care and to create new specialist services for under-18s. It should also help ensure faster access to “talking therapy” for people with anxiety and depression.

The £3bn will boost the depatment of health and social care’s budget by £6.6bn and mean that the NHS’s revenue budget in England in 2021/22 will be £136.1bn.

The Unite union has accused the government of adopting a “divide and rule” approach to public sector pay. Gail Cartmail, its assistant general secretary, said:

It is doubly disappointing that the chancellor has adopted ‘divide and rule’ tactics over public sector pay with an award for NHS staff, but a freeze on pay for millions of others, such as teaching assistants, who are already low paid.

The sop of £250 to the two million public sector workers earning under £24,000-a-year is insulting and compares badly with the inflated sums that the government has wasted on PPE contracts for those with links to the Tory establishment.

Andy Burnham, the mayor of Greater Manchester, said it was “more likely than not” that the region of 2.8 million people would be placed in Tier 3 restrictions from next Wednesday.

Extending the strictest measures will mean most of Greater Manchester has been under some strict curbs on social contact for 18 weeks, since 31 July, enjoying only a few weeks of freedom after England’s first national lockdown was lifted in June.

Burnham said that although infection numbers in Greater Manchester were still high, cases rates had fallen from 556 cases per 100,000 people four weeks ago to 291 cases last week. However, this and other key metrics – including the infection rate in the over 60s – remain higher than the national position. He said:

If things continue in this direction at the rate at which we are seeing change in Greater Manchester, I would want to ask the government for a serious review of Greater Manchester’s position at the first review of tiering arrangements which is scheduled to take place two weeks from now.

Ministers have previously said they do not expect to make significant changes to the tier arrangements when they are first reviewed in mid-December.

Burnham said he did not agree with the tier 3 measures which had been put forward by the government, which he said would be “too punishing on hospitality and will be too hard on city centres, particularly as we go through Christmas and the New Year period.”

Yvette Cooper, the Labour former work and pensions secretary, says the pay rise for public sector workers on less than the average wage will actually represent a pay cut for many people, because it is a flat-rate £250 payment that may not compensate for inflation.

The OBR was also asked today whether the 10pm curfew at hospitality venues led to an increase in cases, as people were traveling home at the same time.

[There were many reports of large crowds on the streets after 10pm, and even an impromptu game of late night cricket in Peckham]

Richard Hughes, who chairs the fiscal watchdog, replied that its data modelling isn’t granular enough to tell such detail.

But he makes a wider point too - it’s not just public health restrictions that matter for the economic impact of coronavirus. It’s also the number of cases, rates of transmission and infection rates.

So while public health restrictions force parts of the economy to close, rising infections also hurt the economy by dampening people’s willingness to go out to restaurants, pubs or the shops.

Hughes adds that we saw this in recent months -- consumption and economic activity started to fall even before new tiered restrictions were introduced, as infections picked up again. That’s why public health interventions, such as test and trace, as so important.

OBR board member Charlie Bean added that the government has recognised that it made sense to allow people more time to finish up their drinks by redesigning the tiering restrictions (last orders at 10pm but closure extended until 11pm, for pubs and restaurants in lower tiers).

Bean says:

Having everyone leaving pubs at the same time and travelling at the same time was not conducive to avoiding infections whereas staggering it and spreading it out made better sense.

And the government has recognised that by the way it has redesigned its tiering systems.

Green groups have accused the chancellor of bungling Britain’s green economic revolution by failing to back the prime minister’s climate plans with enough fresh funds.

Rishi Sunak confirmed the Treasury’s plans to back the 10-point climate plan announced by Boris Johnson last week, but key details to support the roll out of carbon capture projects, new nuclear plants and the production of green hydrogen remain unknown.

Shaun Spiers, the executive director of Green Alliance, said

Last week the prime minister set out a ten point plan for a green industrial revolution. The chancellor’s statement was a chance to back that plan with serious money, but he muffed it.

The statement as a whole, combined with the National Infrastructure Strategy, fails to set the UK on a path to achieving its legal target of net zero greenhouse gas emissions by 2050.

The National Infrastructure Commission acknowledged that there are “currently some missing pieces of the jigsaw when it comes to energy policy”, but added that setting out the UK’s first infrastructure strategy, including a national infrastructure bank, is important to “help catalyse private investment”.

The government is expected to set out how it plans to achieve its green energy plans in a separate white paper, expected before the end of the year.

Updated

Cameron criticises decision to cut aid spending, saying 0.7% target 'said something great about Britain'

David Cameron, the former Conservative leader who was prime minister when the UK finally reached the 0.7% target for aid spending (the culmination of a process that started when Labour began raising the aid budget substantially) and when parliament legislated to make this legally binding, has said Rishi Sunak’s decision to abandon the target is “very sad”. In an interview broadcast on Sky News he said:

It’s a very sad moment. It’s not just that we’re breaking a promise to the poorest people and the poorest countries in the world, a promise that we made and a promise that we don’t have to break. It’s that that 0.7% commitment really said something about Britain, saying that we were going to spend that money helping the poorest people, the poorest countries. It said something great about Britain; not just that we care about tackling global poverty or tackling climate change or helping those that don’t have what we have in this country. It was that we were actually going to do something about it, we were going to lead.

And I saw as prime minister the effects of that leadership: what it brought for Britain, as well as the amazing good it did, putting food on people’s tabled, vaccinating children, stopping mothers dying in childbirth. These were brilliant things we were doing, and it said something brilliant about this country, and I think it’s sad that we’re standing back from that.

When it was put to Cameron that the country could no longer afford to meet the 0.7% target, he said it amounted to just 7p for every £10 the economy earned.

David Cameron
David Cameron. Photograph: Sky News

Updated

OBR's Bean: Long-term impact of no-deal Brexit is similar to Covid

The long-term impact of a no-deal Brexit would be roughly similar to the long-term scarring caused of the pandemic, according to Professor Sir Charlie Bean, a board member at the OBR.

During a press conference to discuss today’s economic and fiscal outlook, Bean was asked whether he agrees with the Bank of England governor, Andrew Bailey, that a no-deal withdrawal is now the biggest long-term threat to the economy.

Bean (a former BoE deputy governor) replies that there’s a lot of imprecision in both the OBR’s estimates of long-term scarring, and the estimates of the impact of no deal

But the order of magnitude of the two is broadly is the same, Bean explains:

We have about a 2% long-term hit from no deal relative to a free trade agreement, and we have scarring of 3% in our central forecast -- with a range between 0% and 6%.

Personally I would like to portray them as broadly of the same order of magnitude.

But in the short-term, Bean adds, the effect of the pandemic is hugely more than Brexit.

Even a disruptive Brexit is not going to lead to anything like the turmoil the economy has been subjected to this year with the pandemic.

[reminder, the OBR has forecast an immediate 2% hit to GDP in 2021 if Britain moves to WTO rules, while the UK economy is expected to shrink over 11% this year]

Lawyers’ organisations welcomed the chancellor’s pledge of more money to tackle the large backlogs in cases that have piled up during the pandemic. David Greene, the president of the Law Society, which represents solicitors in England and Wales, said the promise of £500m was good news in a time of crisis. He went on:

Justice in this country was in a dire situation already before the pandemic, and is under pressure now like never before, so the £275m pledged to reduce persistent crown court backlogs has come not a moment too soon.

The total amount going to the justice system is just over £500m. £337m has been provided for the criminal justice system in England and Wales including £40m to support victims of crime and domestic abuse.

To help the wider justice system cope with Covid-19, the chancellor has guaranteed an additional £119m, including £76m to increase family court and employment tribunal capacity to reduce backlogs. £43m has also been secured to ensure that courts and prisons remain Covid-safe – a key concern of legal practitioners and a consistent theme of the Law Society’s representations to the government.

Updated

And this is from Sir Ed Davey, the Lib Dem leader, on the spending review.

With the economic uncertainty caused by the pandemic, the chancellor needed to ensure today that no one is left behind. That was the litmus test, and he has failed.

Far from a radically new approach to the recovery that tackles deep-seated inequality and builds a new green economy, we have a government that is failing to support carers, children living in poverty and everyone in need of mental health services.

The chancellor has also made some unforgivable political choices today. He has chosen to continue to ignore people excluded from support and chosen to reject calls to properly extend furlough, leaving too many people facing unemployment. People deserve better.

Caroline Lucas, the Green party MP, says Rishi Sunak mostly ignored the climate crisis and the environment in his spending review. In a statement she said:

The chancellor had a unique opportunity to deliver both on jobs and the climate and nature crises, and he’s bungled it. He could have created far more jobs, with a better short-term return on investment and higher long-term savings, by a comprehensive green approach, including a net zero test and assessing this whole package against the UK’s climate and nature goals ...

There is a huge amount to do reducing our emissions from homes, protecting and restoring nature which is so important for people’s health and wellbeing, and transitioning to a carbon-free future. Yet in his spending review statement we heard more about by-passes than we did about nature, and climate was mentioned only in passing. These two crises were virtually ignored.

Updated

Train operators getting £10bn to compensate for lost revenue from Covid, Sunak confirms

Train operators will have been subsidised to the tune of an extra £10bn due to the Covid crisis, the spending review made clear.

The emergency agreements signed this year to protect rail services have cost the Department for Transport an extra £8bn, on top of around £4bn in normal state funding, direct and indirect. Another £2bn has already been allocated for the next fiscal year from April, underlining that passenger numbers are not expected to return to normal levels soon.

An additional £4.8bn in Covid relief has been earmarked for buses, light rail and Transport for London, although, unlike national rail, with no further provision for 2021-22.

The figure is likely to be revised, with bus operators having been assured that losses will be made good until recovery, costing around £300m this year.

But it underlines the standoff between the London mayor and the government over funding, with Sadiq Khan having said the capital will likely need an additional £2.9bn next year to keep transport services running.

Updated

Jeremy Hunt, the Conservative former foreign secretary and Boris Johnson’s main rival in the 2019 leadership contest, has also criticised the cut to aid spending. Speaking in the Commons he said:

I recognise that the chancellor will have made the decision on 0.7% with an extremely heavy heart but does he recognise that the respect felt for this country around the world is because we have championed causes throughout our history that matter to people everywhere like democracy, human rights and the rule of law.

One of those causes is tackling extreme poverty, so to cut our aid budget by a third in a year when millions more will fall into extreme poverty will make not just them poorer but us poorer in the eyes of the world, because people will worry that we are abandoning a noble ideal that we in this country have done more to champion than anyone else.

The OBR also points out that a no-deal Brexit will hurt parts of the UK economy which escaped the worst of the Covid-19 pandemic.

They say:

A no-deal Brexit is likely to impinge on different sectors of the UK economy to those that have been hardest hit as a result of the pandemic.

Businesses involved in the provision of non-tradable, face-to-face services such as hospitality, transport, and entertainment have been hardest hit by coronavirus as they are directly affected by public health restrictions and face difficulties in implementing social distancing.

By contrast, firms in the manufacturing, financial services, and mining and quarrying sectors have been spared the worst economic consequences of the pandemic thanks to their ability to continue to operate while adhering to social distancing rules.

However, it is these latter, trade-intensive sectors that are most exposed to the loss of unfettered access to the EU market.

How no-deal Brexit would hit sectors of the UK economy

Here’s some reaction to their forecast that moving to WTO rules would wipe 2% off GDP next year:

Updated

In his spending review Rishi Sunak announced a £4bn “Levelling Up Fund” for England, with Scotland, Wales and Northern Ireland getting extra funding too. The fund will pay for “local infrastructure that has a visible impact on people and their communities and will support economic recovery”.

At a press conference Andy Burnham, the mayor of Greater Manchester, said that he welcomed infrastructure spending but that this was not enough. Greater Manchester’s share would be £30m next year, he said. He went on:

I don’t believe you could say that amounts to a substantial plan to level up the country.

In his speech to MPs Sunak stressed that MPs would be involved in decisions about where the money was spent. He said:

Projects must have real impact. They must be delivered within this parliament. And they must command local support, including from their member of parliament.

The Labour MP Chris Bryant says this sounds corrupt.

Updated

OBR: No-deal Brexit would knock 2% off GDP next year

The OBR has also modelled the impact of a no-deal Brexit, forecasting that moving to WTO rules after 31 December would reduce UK real GDP by 2% in 2021.

That’s due to temporary disruptions to cross-border trade, lower business investment, lower productivity, and a rise in structural employment.

This economic hit would delay the point at which the UK economy regained its pre-virus peak by almost a year to the third quarter of 2023, compared to Q4 2022 in the OBR’s central scenario (see here).

And it’s on top of the 4% long-run loss of output which the OBR has forecast if the UK secures a free trade agreement with the bloc, compared to remaining in the EU.

The OBR says:

The short-term impact is due to various temporary disruptions to cross-border trade. These effects abate over the course of the year as the Government and businesses become more familiar with the new rules and procedures and find ways to operationalise them.

However, the longer-term hit to productivity builds slowly to leave output around 1½ per cent lower than our central forecast after five years. This would continue to build beyond the forecast horizon to reach 2 per cent in steady state.

Under the OBR’s WTO scenario, when the transition period ends on 31 December 2020:

  • The UK Government immediately imposes its new UK global tariff (UKGT) on EU imports and the EU imposes its common external tariff on UK imports.

  • There is a larger and more rapid increase in non-tariff barriers to EU trade as the UK exits the Single Market without the regulatory equivalence, public procurement and mutual recognition arrangements that are sometimes part of typical trade agreements.
The impact of a no-deal Brexit on UK GDP
OBR’s no-deal Brexit forecasts

A no-deal Brexit would also push unemployment higher next year, the OBR forecasts:

In our central forecast with the WTO scenario superimposed, unemployment peaks at 8.3 per cent in the third quarter of 2021, 0.9 percentage points higher than in our central forecast in that quarter

The impact of a no-deal Brexit on UK unemployment

Update: Also.. a WTO scenario would drive up inflation, meaning higher prices in the shops.

The OBR adds:

The imposition of tariffs on EU imports, higher non-tariff barriers, and a drop in the exchange rate all raise consumer prices, leaving them 1.5 per cent higher by the forecast horizon than in our central forecast:

Updated

Met police and MI5 to join up in new Counter Terrorism Operations Centre

Specialist Met police and MI5 officers will come together in a new Counter Terrorism Operations Centre to improve co-ordination between investigators tackling the violent threat from Islamism and the far right.

The plan was quietly announced in the detail of Rishi Sunak’s spending review although Whitehall sources said it had been a couple of years in development, and was originally a response to the string of terror attacks in 2017.

It will see specialist police and spies gradually relocate from Scotland Yard and Thames House to a new London building, whose location is not yet disclosed, although it is expected to take five years before it is fully up and running.

Independent reviews have said that while the Met and MI5 generally work well together there remain areas of difficulty, including “non-integrated systems” as reported by Lord Anderson last year.

Previously MI5 has acknowledged in evidence to parliament: “If we are honest at the moment we have a spirit of partnership and a sort [of] professional esprit de corps that is up here and we have IT connectivity that is kind of [down] here.”

Prosecutors and other specialists are expected to join the centre, but the organisation will not have its own head – and while investigators will work side by side they will continue to report into their separate agencies.

Britain’s intelligence agencies will also receive £173m more in 2021-22, which the Treasury said amounted to “a 5.4% average annual real-terms increase since 2019-20” – plus £1.3bn capital investment for the next three years. The extra cash is shared between MI5, MI6 and GCHQ, whose individual budgets are kept secret.

Updated

Liz Sugg resigns as sustainable development minister over cut to aid spending

Liz Sugg, minister for the overseas territories and sustainable development in the Foreign Office (or the Foreign, Commonwealth and Development Office as it now is, since it subsumed DfID earlier this year), has resigned over the cut to aid spending. In her resignation letter she says abandoning the 0.7% aid target is “fundamentally wrong”.

Sugg was made a peer in 2016 after working as an aide to David Cameron when he was prime minister. Getting the Conservative party to commit to the 0.7% aid target was one of Cameron’s main achievements as party leader – it was at the centre of his efforts to reposition the party – and the legislation enshrining it in law, the International Development (Official Development Assistance Target) Act, was passed by the coalition government in 2015.

Updated

Here is the National Infrastructure Strategy document (pdf) published today. It confirms that Crossrail 2 has been stopped, but it says this does not mean the government is “levelling London down”. It says:

Levelling up the rest of the UK does not mean levelling London down.

The government is continuing to address capacity issues in the capital, by financing the completion of Crossrail, but has agreed that Transport for London will stop development on Crossrail 2.

This frees up investment to raise the performance of public transport networks in the regional cities towards London’s gold standard.

Updated

From the Nobel laureate Malala Yousafzai

The OBR’s Economic and Fiscal Outlook (pdf) is not exactly a light read, but whoever drafted the passage on adult social care does seem blessed with a dry sense of humour. It says:

Having postponed implementation of reforms underpinned by the 2011 ‘Dilnot commission’, the government announced in December 2017 that it would publish a green paper on the future of adult social care in the summer of 2018. This did not materialise. The 2019 Conservative manifesto commits to “urgently seek a cross-party consensus in order to bring forward the necessary proposal and legislation for long-term reform”. The prime minister told the BBC in January 2020 that he would be “bringing forward a proposal” later this year, and in relation to implementation that “we will certainly do it in this parliament”. The spending review allows local authorities to raise council tax faster to increase funding for adult social care, but news of long-term reform of the system is still pending.

Updated

Headteachers responded with fury to the chancellor’s spending review, describing it as “a slap in the face” and “a body blow” for school leaders and their teams, who have worked tirelessly to keep schools open during the pandemic.

They are angry that the chancellor failed to provide any additional money to help schools with mounting Covid costs which are decimating budgets, and warned that a pay freeze would negate efforts to keep teachers in the profession after a decade of pay austerity.

Paul Whiteman, the general secretary of the National Association of Head Teachers, said public sector workers, who had been on the front line of the pandemic response, should not be forced to pay for the recovery out of their own pockets.

Keeping schools open is leaving school leaders frayed and exhausted. Today they and other public sector workers were looking for relief from the government.

But the chancellor has not provided a single additional penny to cope with the costs of Covid. Salaries are being suppressed, Covid costs are being left unmet and the needs of the most vulnerable students are being ignored.

Geoff Barton, the general secretary of the Association of School and College Leaders, said:

The government asks more and more of teachers and leaders, and then effectively cuts their pay. It should not be surprised if staff decide to leave the profession.

He welcomed confirmation of additional investment in schools through to 2023, but said any uplift in funding was being wiped out by the cost of Covid safety measures and teacher supply cover which the government has not yet reimbursed.

Dr Mary Bousted, joint general secretary of the National Education Union, added:

The chancellor said he wants stronger public services but has delivered a body blow to staff in our schools and colleges. Education workers are key workers who have kept the country going during the pandemic, but pay cuts are their only reward from this government.

Updated

Sunak criticised for refusing to commit to retaining £20 a week universal credit uplift

Anti-poverty campaigners have criticised Rishi Sunak’s refusal to commit to retaining the £20 a week coronavirus top-up to universal credit, leaving millions of struggling families at risk of losing £1,000 a year from next April.

The government said it was to delay until January a decision on whether to keep the uplift, which charities have argued has kept an estimated 700,000 people – including 300,000 children – above the poverty line during the pandemic crisis.

Becca Lyon head of child poverty at Save the Children, said:

Parents tell us they’re already having to go without meals or electricity when their money runs out – they simply cannot afford to lose over £1,000 a year.

And Helen Barnard, a director of the Joseph Rowntree Foundation, said:

It is deeply disappointing that the chancellor is leaving millions to wait out the winter in fear and uncertainty with no reassurance forthcoming that he would not cut universal credit as planned in April. There is no conceivable scenario in which this support will not be needed, and inaction risks a sharp rise in poverty.

Meanwhile around 2 million claimants on older “legacy benefits” who were excluded from the £20 a week Covid premium, many of them disabled, will receive a weekly rise of 0.5% – equivalent to just 37p a week – from next April.

State pensions will be increased by 2.5% from April. Local housing allowance increases announced at the start of the pandemic to help families with the cost of private renting will also be maintained.

Updated

These are from Torsten Bell, chief executive of the Resolution Foundation thinktank, with some of the most striking points from the spending review and the OBR outlook.

(According to the Ashcroft biography, in a speech in 2015, when he had just been elected to parliament, Rishi Sunak said: “In normal times public spending should not exceed 37% of GDP. That is the best estimate of our income as a government and therefore the best guide to what we can afford to spend.”)

Updated

Jonathan Geldart, director general of the Institute of Directors, is relieved that Rishi Sunak didn’t announce new tax rises today.... but concerned that the chancellor also didn’t mention the UK’s exit from the EU:

Today’s statement provided a sobering view of the challenge ahead, and funding for infrastructure and skills will be crucial to meeting that challenge.

Just as significant was what the chancellor didn’t announce. Business leaders will be relieved that the Treasury is resisting the temptation to hike taxes on enterprise for now, but will be concerned that Brexit didn’t merit a mention.

Nigel Morris, employment tax director at MHA MacIntyre Hudson, is disappointed that the chancellor hasn’t revived the £1,000 bonus for taking furloughed staff back until January. It was shelved when the job retention scheme was extended until next March, which hospitality firms say will create serious cashflow problems in the new year.

More help for businesses is essential to protect our economy, yet we saw no major support made available for them, for example a cut in employers’ national insurance payments, or restoration of the £1,000 job retention bonus for keeping on furloughed staff.

The increase in the national living wage is great news for employees, as is its extended age range, which means employees now qualify from age 23, but this puts more pressure on stretched employers to fund wages and associated national insurance costs.

Sarah Carlson, Moody’s lead sovereign analyst for the UK, says the UK faces ‘significant’ challenges:

Today’s announcements by the chancellor and the Office for Budget Responsibility underscore the significant fiscal and structural growth challenges that the UK will face once the coronavirus pandemic abates.

The UK’s future sovereign rating trajectory will be driven, in large part, by how well the UK is able to rebuild fiscal resilience and increase economic growth potential.

Updated

Sarah Brown, chair of the global children’s charity Theirworld (and wife of the former Labour prime minister) has also condemned the cut in aid spending. In a statement she said:

The chancellor’s announcement on international aid is deeply disappointing for the British people. At a time when the world’s poorest countries are facing an increase in extreme poverty, inequality and a global education crisis, we should not sit back and watch. It is heartbreaking for our proud nations to play a part in setting back the progress of the hopes and dreams of children around the world.

From a moral, diplomatic and security perspective, abandoning the world’s poorest people as we face a steep global recovery to the pandemic hurts us all.

Many other development charities have spoken out in similar terms. This is from Danny Sriskandarajah, Oxfam GB’s chief executive.

Cutting the UK’s lifeline to the world’s poorest communities in the midst of a global pandemic will lead to tens of thousands of otherwise preventable deaths. At a time when hundreds of millions of people are hungry and decades of progress against poverty is under threat, today’s decision is a false economy which diverts money for clean water and medicines to pay for bombs and bullets.

Nicola Sturgeon, Scotland’s first minister, says the cut to aid spending is “deplorable”.

This is from Paul Johnson, director of the Institute for Fiscal Studies.

In other words, the Treasury is allocating less for departmental spending from 2021-22 (of the order of £10bn upwards) than originally planned. That explains why, in line 3 of the scorecard (see 1.33pm) huge sums start appearing with a + alongside.

The Resolution Foundation have shown just how badly the UK’s growth and borrowing forecasts have deteriorated since the March budget:

Former Tory DfID secretary Andrew Mitchell suggests aid spending cut could lead to 100,000 preventable deaths

In the Commons the Conservative Andrew Mitchell, who was international development secretary in the coalition, suggested that children would die as a result of the cut in the aid budget. Addressing Rishi Sunak, he said:

As a result of the pandemic here in the UK, 50,000 people have died and we are rightfully moving heaven and earth to prevent more deaths here at home. But is [Sunak] aware his proposed breaking of the 0.7% promise and the 30% further reduction in cash will be the cause of 100,000 preventable deaths, mainly among children?

This is a choice I for one am not prepared to make and none of us in this house will be able to look our children in the eye and claim we did not know what we were voting for.

Sunak said the UK would still “make a difference to the world’s poorest countries” with its spending.

Tom Tugendhat, the Conservative chair of the foreign affairs committee, has also signalled his doubts about the plan.

Updated

OBR: Early vaccine rollout would speed economic recovery

The Office for Budget Responsibility has also outlined that the UK’s economic outlook depends heavily on how quickly lockdowns measures are lifted, and if effective vaccines are rolled out.

They have drawn up three scenarios for the economy, depending on the battle against Covid-19.

They are:

  • an upside scenario, in which lockdown succeeds in bringing the second wave of infections under control and the rapid rollout of effective vaccines in spring 2021 enables output to return to its pre-virus level late next year;

  • a central one, in which restrictive public health measures need to be kept in place until the spring and vaccines are rolled out more slowly (in the second half of 2021), leading to a slower return to pre-virus levels of activity at the end of 2022;

  • and a downside one, in which lockdown has to be extended, vaccines prove ineffective in keeping the virus in check, and a more substantial and lasting economic adjustment is required with economic activity only recovering to its pre-virus level at the end of 2024.

In the upside scenario, unemployment peaks at 5.1% (compared to 7.5% in the central scenario), and the UK avoids long-term economic scarring from the crisis.

But in the downside scenario (without an effective vaccine), the economy doesn’t claw its way back to pre-crisis levels until the end of 2024, unemployment peaks at 11%, and the economy suffers serious scarring -- with output at the five-year horizon 6% respectively below the pre-pandemic trajectory.

The central scenario shows the economy will be 3% smaller in 2025 than forecast in March.

Office for Budget Responsibility forecasts
Office for Budget Responsibility’s virus scenarios Photograph: OBR

The OBR produced its “near-final draft” of the report late last week - after Pfizer and Moderna had reported their encouraging vaccine results, but before AstraZeneca reported on Monday that its vaccine can be 90% effective (with a half-dose, then a full-dose)

The OBR say that the success of AstraZeneca’s vaccine, developed by Oxford University, is crucial for rapid vaccination next year:

The announcements that the Pfizer-BioNTech and Moderna vaccines had achieved excellent results in preventing infection in late-stage clinical trials, which arrived just as our forecasts were being finalised, is undoubtedly very positive news. However, it does not automatically imply an immediate or complete return to normal economic life for the whole population for several reasons. First, the Government has purchased enough of the Pfizer-BioNTech vaccine to immunise only 20 million people and enough of the Moderna vaccine for 2½ million (with delivery not expected until the spring).

Widespread vaccination beyond vulnerable groups during 2021 would also likely require the Oxford-AstraZeneca vaccine to be successful.

The OBR also points out that rolling out vaccines across the population is a big logistical challenge and will take time.

Finally, there is a possibility the virus will mutate in a way that renders the vaccines ineffective; the recent mutation via mink farms in Denmark is indicative of the risks.

Updated

These tweets, from the Institute for Fiscal Studies, summarise what today’s spending review and OBR documents tell us about spending and debt.

Nigel Farage, the former Ukip leader who now leads the Brexit party, has welcomed the decision to cut aid spending (a longstanding Ukip/Brexit party demand).

Here is more from what Anneliese Dodds, the shadow chancellor, told MPs when delivering Labour’s response to the spending review in the Commons. She said:

Many key workers who willingly took on so much responsibility during this crisis, are now being forced to tighten their belts. Now. Not in the medium term to which the chancellor refers, now.

In contrast there’s been a bonanza for those who have won contracts from this government. Companies with political connections have been 10 times more likely to win government contracts ...

In its response to this pandemic, the Conservative government has wasted and mismanaged public finances on an industrial scale. A hundred and thirty million pounds to a Conservative donor for testing kits that were unsafe; £150m for facemasks and £700m on coveralls that couldn’t be used.

A £12bn hit to our economy because the more effective, shorter circuit breaker was blocked, and a lengthier, more expensive lockdown put in place instead.

Twelve billion pounds – so far – spent on a test-and-trace system that is still not working.

And today, news of £10bn in additional costs for PPE, at least partly down to the Conservatives’ lack of pre-pandemic planning.

“This waste and mismanagement is part of a longer-term pattern – showing that claims today around levelling up simply don’t match the evidence.”

And this is from the response from the SNP’s economy spokesperson, Alison Thewliss. She said:

This spending review is an important opportunity and an important test and instead of posing photographs in his favourite hoodie, the chancellor should have been listening to those who are struggling.

Twenty-nine million pounds for a festival of Brexit while they let weans go hungry at home and abroad just about sums this tawdry government up. Reneging on the 0.7% aid commitment while the world struggles in a Covid pandemic is just cruel.

He says he’s come to talk about jobs, but how many jobs has this chancellor cost?

Updated

Darren Cormack, the chief executive of the landmine clearance charity the Mines Advisory Group (MAG), warns that cutting the foreign aid budget will hurt some of the world’s most vulnerable people:

With Covid-19 pushing tens of millions of people around the world further into poverty, now is not the time to be reducing UK aid spending.

Stepping back from our international commitments doesn’t just risk damaging the UK’s global standing, it risks doing harm to some of the most vulnerable people across the globe

Updated

Cut in aid spending 'shameful and wrong', says archbishop of Canterbury

Justin Welby, the archbishop of Canterbury, has described the cut in the aid budget announced by Rishi Sunak as “shameful and wrong”.

Updated

Nicola Sturgeon has hinted at ongoing concerns around the four nations’ Christmas relaxation as she stressed repeatedly that allowing up to three households to come together over five days marks the “outer limits” of what people should be doing together and that her “default advice” was for people to stay at home in their own households.

Describing yesterday’s decision, reached at a Cobra meeting between the UK government and devolved administrations, as “not an easy one”, Sturgeon told her daily briefing that she was “very keen to have the definition of household determined nation by nation” in particularly because of concerns with what she believed to be the English plan to allow bubbles of two households to come together with a potential total of six. “I think that would be going too far and it wouldn’t be something I’d be comfortable with in Scotland,” she said.

She said Scottish government guidance on the four nations plan would be published tomorrow, and that one consideration would be whether to allow extended households to count as one or two households for Christmas purposes. She warned Scots to expect that “the guidance will be looking to tighten rather than expand”.

She stressed that she was “not positively encouraging people to meet”. She said:

If you can get through this Christmas staying within your own home within your own household please do so.

Care home providers said Sunak had left a “black hole” in social care budgets with announcements of what he said was £2bn in additional funding.

MPs, peers and the care sector have argued that even before the Covid crisis the government needed to increase spending on adult social care by £7bn to £8bn per year. Councils have estimated that Covid has added a further £6.6bn in costs in just six months with costs soaring and occupancy falling. More than 18,000 people died from Covid in care homes.

Sunak’s offer falls well short of filling the voids, the care industry said. Sunak announced £300m in new central government grant, plus powers for councils to levy a 3% council tax precept to fund social care. Sunak said that adds up to £1bn in new money, but the Kings Fund thinktank said the precept does not guarantee money is raised where needed.

Sunak also announced a continuation of £1bn announced in 2019 for both adult and childrens care, around half of which typically goes to adult care.

Care England which represents the large commercial care providers said the pledges left “a black hole. Vic Rayner, the executive director of the National Care Forum, which represents not-for-profit providers said there was “a massive gap”.

Updated

According to this chart from the Spectator’s editor, Fraser Nelson, the growth figures announced by Rishi Sunak mean the UK is on course for the second largest economic contraction this year in Europe.

Updated

Here is my colleague Philip Inman’s early story about the spending review statement.

And here is a summary of the key points from the speech.

OBR: Covid-19 exacts a "heavy and mounting toll on the public finances"

The Office for Budget Responsibility’s new Economic and Fiscal outlook is out, and it pulls no punches about the economic emergency created by Covid-19.

The OBR says:

The coronavirus pandemic has delivered the largest peacetime shock to the global economy on record. It has required the imposition of severe restrictions on economic and social life; driven unprecedented falls in national income; fuelled rises in public deficits and debt surpassed only in wartime; and created considerable uncertainty about the future.

The UK economy has been hit relatively hard by the virus and by the public health restrictions required to control it.

The OBR then warns that Covid-19 has also exacted “a heavy and mounting toll on the UK public finances”.

In our central forecast, receipts this year are set to be £57 billion lower, and spending £281 billion higher, than last year. The Government has committed huge sums to treat the infected, control the spread of the virus, and cushion its financial impact on households and businesses.

As support has been expanded and extended, including in the wake of the second wave of infections, its total cost this year has risen from £181 billion at the time of the Summer Economic Update, to £218 billion at the time of the Winter Economy Plan, to £280 billion in this forecast.

As Rishi Sunak outlined, the OBR’s central scenario is that the UK deficit surges to £394bn this year. That’s 19% of GDP, which is the highest level since the end of the second world war.

In comparison, in 2009-10 after the financial crisis the UK borrowed £157.7bn, or 10.1% of GDP.

OBR forecasts, November 2020
OBR forecasts, November 2020. Photograph: Office for Budget Responsibility

This would drive the national debt to 105% of GDP, the OBR says, its highest level since 1959-60, adding:

Borrowing falls back to around £102 billion (3.9 per cent of GDP) by 2025-26, but even on the loosest conventional definition of balancing the books, a fiscal adjustment of £27 billion (1 per cent of GDP) would be required to match day-to-day spending to receipts by the end of the five-year forecast period.

Updated

Here is the scorecard from the spending review document (pdf). This is the most important table in the whole document because it sets out what everything is going to cost.

Negative sums represent money is effectively having to spend (over and above what is already plannd for); positive sums represent money coming in.

Spending review scorecard - page 1
Spending review scorecard - page 1 Photograph: HM Treasury
Spending review scorecard - page 2
Spending review scorecard - page 2 Photograph: HM Treasury
Spending review scorecard - page 3
Spending review scorecard - page 3 Photograph: HM Treasury

In her speech Anneliese Dodds points out that Rishi Sunak did not even mention Brexit, or the cost of not having a trade deal, in his speech. She says businesses need certainty.

Anneliese Dodds, the shadow chancellor, is responding for Labour.

She says earlier this year the chancellor clapped for key workers. But now he is making many of them face a pay freeze.

She says this will take money out of the economy.

In contrast, there has been a bonanaza for firms getting contracts from this governemnt. Firms with government connections have been 10 times as likely to get a contract as others, she says.

She says there has been waste “on an industrial scale”.

And she says the decision to ignore Labour’s call for a short, circuit breaker lockdown, and to have a month-long one instead, has cost the economy £12bn.

Sunak says individuals and communties must become stronger, healthier and happier as a result.

The spending announced today is secondary to the courage, wisdom, kindness, and creativity it unleashes.

He says the government has funded the priorities of the British people. Now the job of delivering them starts, he says.

And that’s it. The statement is over.

Sunak says numbers are not enough on their own to explain the government’s vision for the country.

There will also be a new immigration system, and a new planning system, with an emphasis on beautiful homes. And the government will protect free speech, and value jobs.

Good jobs are the most rewarding and sustaining path to prosperity, he says.

But encouraging the individual and community brilliance, on which a thriving society depends remains as ever, a work unfinished.

Sunak says people want to be proud of the places they call home.

For too long funding for development has been complex and ineffective.

A new “levelling up” fund worth £4bn is being set up. It will be managed by the Treasury, the transport department and the communities department.

It will take a holistic approach, he says. Projects must command local support, including from MPs.

This will fund what people and places need, he says.

Updated

Sunak reminds MPs that the government has announced an extra £24bn for defence.

Capital spending next yer will be £100bn, he says.

He says a new infrastructure strategy is being published today.

And a new infrastructure bank will be set up.

Sunak confirms UK will abandon 0.7% target and spent 0.5% of national income on aid next year

Sunak says spending so much on international aid is difficult to justify with borrowing so high.

But at a time of unprecedented crisis, the government must make tough decisions, he says.

He says it will spend 0.5% of national income on aid in 2021 - not 0.7% This will amount to £10bn.

He says it will be the government’s intention to return to 0.7%.

Even with this target, the UK will still be the second biggest aid spender in the G7, he says.

The 11.3% slump in UK GDP forecast this year will be even worse than the recession of 1921, when Britain’s economy shrank almost 10% in the aftermath of the first world war and the Spanish flu epidemic.

It means 2020 will see the biggest contraction since 1709, when the Great Frost ravaged Europe’s economies, creating food shortages as livestock froze.

Sunak announces an extra £2.2bn for schools.

And the government will fund more prison places, he says.

Sunak is now addressing departmental spending.

Day to day departmental spending will increase by 3.8%, he says. He says that is the fastest rise in cash terms in 15 years.

The core health budget will grow by £6.6bn, he says.

Updated

Sunak says the national living wage will rise by 2.2% to £8.91 per hour. About 2 million people will benefit, he says.

Updated

Sunak says most public sector workers will get pay rise next year

Sunak confirms the government will spend £2.9bn on a Restart employment scheme.

He says the government will provide a pay rise to doctors and nurses in the NHS.

Pay rises in the rest of the public sector will be paused next year.

But people on low pay will get a pay rise. Anyone earning less than the median wage, £24,000, will get a pay rise of £250, he says.

He says this means most public sector workers will get a pay rise.

Government set to borrow £394bn this year, says Sunak

Sunak says the government is set to borrow £394bn this year, or 19% of GDP.

That is the highest level of borrowing in peacetime history, he says.

Borrowing will remain above £100bn a year for the rest of this parliament, he says.

Updated

Sunak says economy set to contract by 11.3% this year

Sunak says the economy will be 11.3% smaller this year.

But it is expected to grow by 5.5% next year, then 6.6%, then 2.3%, then 1.7% and then 1.8%.

But output will not return to pre-crisis levels until the fourth quarter of 2022, he says.

Sunak says he is prioritising jobs, businesses and public services.

The government is providing £280bn to get the country through Covid, he says.

Next year £18bn will be spend on testing, PPE and vaccines, he says.

He says over £2bn is being kept on transport, including rail subsidies.

Over £3bn is going to councils, he says.

Overall the public services will get £55bn, he says.

Rishi Sunak delivers spending review statement

Rishi Sunak says the spending review delivers on the priorities of the people.

The health emergency is not yet over, he says. And the economic emergency has only just begun.

He says there will be a once-in-a-generation investment in infrastructure.

From Politico’s Emilio Casalicchio

PMQs is over.

The Speaker ends by saying he is pleased the Commons has been able to provide equipment to No 10 to help the PM respond to questions remotely. But the Commons wants its kit back, he says.

Andrew Percy (Con) asks the PM to look again at tier 2 restrictions, and how they affect pubs that cannot offer substantial food.

Johnson says grants are available to help firms in hospitality and accommodation. He is keenly aware of how difficult it is for these pubs and hotels, he says. He says he will do his level best to support them.

He pays tribute to the people of Liverpool for supporting the mass testing pilot. That seems to have helped drive the virus down, he says. That offers a way forward.

Jon Trickett(Lab) says Rolls-Royce are about to offshore 350 jobs from the north of England. Does the PM agree those jobs should stay?

Johnson says Trickett is right to support Rolls-Royce. It is suffering from the problems in the aerospace sector, he says. He says Trickett is making “an excellent point”.

Updated

Tonia Antoniazzi(Lab) says the pay freeze will mean a cut to wages in real terms for public sector workers.

Johnson says, at a time when the private sector has been badly hit, and private sector workers have seen a hit to their wages, the government has to be responsible. But he says public sector workers got a pay rise in July. And there is more to come in the spending review, he says.

Updated

Rachael Maskell (Lab) asks if the government will invest in BioYorkshire.

Johnson says he hopes BioYorkshire will be among the beneficiaries of the government’s green investment programme.

Gareth Davies (Con) asks if the PM backs calls for businesses to hire veterans.

Johnson says he does back these initiatives. Firms are getting tax breaks if they hire veterans.

Andrew Rosindell (Con) says, with London likely to enter tier 2 or tier 3 measures, does the PM agree there should be a full cost-benefit analysis first. He says new measures could be worse than the virus.

Johnson says Rosindell is right to highlight the damage lockdowns can do, but the government must consider the impact of the virus too.

He says the government will set out the health, economic and social impacts of its proposals, and the data supporting it, as it has done in the past.

It it not clear quite what Johnson is proposing, but this sounds like a potentially significant promise. Tory MPs in the Covid Recovery Group have been demanding a cost-benefit analysis as the price for their support in a vote on the new measures.

  • Johnson says MPs will be given data assessing the economic and social impact of the new three-tier restrictions.

Updated

Navendu Mishara (Lab) asks about trams in Stockport.

Johnson says he will look at this.

Stephen Farry(Alliance) asks for a grace period to allow time for the new post-Brexit arrangements to be introduced in Northern Ireland.

Johnson says there won’t be an extension, but the government is taking steps to ease the move to the new arrangements.

Updated

Dehenna Davison (Con) asks the PM if he agrees that now is not the time for MPs to have a pay rise.

Johnson says he does agree. He says ministerial salaries have already been frozen, as they have been since 2010.

Updated

Sir Ed Davey, the Lib Dem leader, says he asked the PM three weeks ago to raise the carers’ allowance by £20 a week. The government has not done that, but it has found millions for Tory donors, he says.

Johnson says he will look at this again.

Johnson says the UK will use its freedom after leaving the common agriculture policy to support farmers in protecting the environment.

Ian Blackford, the SNP leader at Westminster, says protecting foreign aid has long been an agreed position in the Commons. He quotes a minister defending the 0.7% aid target. Does the PM agree?

Johnson says it was the Conservative government that imposed the aid target. We are the second biggest donor in the G7, he says. He says that will continue. There has been a massive increase in aid spending. And it benefits Scotland, he says, because the civil servants from what was DfID work there.

Blackford says he was quoting Johnson’s own words to him. He says the pandemic will create extreme poverty around the world. The UK government cannot eradicate the threat from Covid if it is still spreading around the world. So does the PM agree it is worth spending money on protecting people?

Johnson says he does agree with that. He says the UK has already given more than almost any other country in the world to Covax, the international vaccination programme. The people of the UK should be very proud of what they’re doing, he says.

Updated

Laura Trott (Con) asks about school funding.

Johnson says schools have had extra this year. Kent is getting an extra £20m for schools, he says.

Updated

Starmer says he is not knocking the private sector. He is knocking the abuse of public money. He says the government is penalising public sector workers, who are not getting a pay rise. Will they get the pay rise they deserve?

Johnson says public sector workers go an above-inflation pay rise this year. And they will still get the living wage, as the chancellor will say in his statement. (There has been speculation about the living wage being frozen.) He says the government is taking the tough decisions that will allow the economy to bounce back.

Starmer moves on to conflicts of interest. “Where do I start with this one,” he asks. He says Matt Hancock hired as an adviser a friend who was also a lobbyist, working on behalf of people looking for government contracts. Was the PM aware of this?

Johnson says any interests are declared. He says the government moved heaven and earth to get PPE. He says what Starmer is saying reveals Labour’s hatred of the private sector. But he says the private sector has been invaluable. How else could the govenrment manage? With some “deranged” reliance on the public sector?

Starmer says he is tackling the issues in his party, while Johnson is running away from his. So that’s another broken promise. Next, misusing taxpayers’ money. This is the most serious, he says. He says the government purchased 180m items of unuseable kit. How many hundreds of millions of pounds have been wasted on equipment that cannot be used?

Johnson says 99.5% of items of PPE purchased conformed to clincical needs. Of all the “pathetic lines of attack, this is the feeblest”. He says the government was being attacked by Labour at the time for not moving fast enough to procure PPE. Now Starmer is saying the government moved to fast. Johnson says Labour must decide what its attack line is.

Starmer says he will chalk that up as one broken promise. Next, “no leaking”. Some MPs laugh. He says the lockdown plans were leaked. There have been other leaks. This leaking is causing serious concern. Has the PM found out who is leaking?

Johnson says Starmer is concentrating on “trivia”. He says people want to see Labour supporting the fight against coronavirus. He says he would take this more seriously if Jeremy Corbyn were not still a member of the Labour party.

Sir Lindsay Hoyle, the Speaker, says it is for the PM to answer the questions.

Updated

Starmer says Johnson did not answer the question. Let’s go through them, he says. He quotes what the ministerial adviser on standards concluded about Priti Patel and bullying. What message does it send that the adviser has resigned, and Patel is still in post?

Johnson says Patel has apologised. He says he makes no apology for standing up for a home secretary introducing a new immigration system against considerable resistance. She is showing “steely determination”, he says.

Sir Keir Starmer says in August last year the PM wrote the foreword to the ministerial code, saying there must be no bullying, no harrassment, no leaking, no misuse of public money and no conflicts of interest. How many of those promises have his ministers kept?

Johnson says his ministers are doing an outstanding job, and that is what they will continue to do. He says the spending review will be one of the most ambitious programmes seen in generations.

Laurence Robertson (Con) asks for an assurance that sovereignty for the whole of the UK will be protected in a trade deal with the EU.

Johnson says he can. He says the UK will only make progress if the EU accepts British sovereignty over its waters in relation to fishing.

Boris Johnson is taking PMQs virtually again. He starts by saying this is his last day in self-isolation.

Rishi Sunak leaving 11 Downing Street this morning, with a copy of the spending review.
Rishi Sunak leaving 11 Downing Street this morning, with a copy of the spending review. Photograph: Kirsty Wigglesworth/AP

PMQs

PMQs is starting in five minutes.

Here is the list of MPs down to ask a question.

Rishi Sunak is expected to use the spending review to announce that the government will temporarily abandon the commitment to spend 0.7% of national income on overseas aid. But many Tories are opposed, and in an article for ConservativeHome, its editor, Paul Goodman, that if Sunak were to do this, he would find it harder to resist pressure to raise taxes. Here’s an extract.

The Conservative manifesto declared that “we will proudly [our italics] maintain our commitment to spend 0.7 per cent of GNI on development”. It is sometimes necessary to break manifesto pledges, but there should be a strong presumption against it.

And there is also a great deal more at stake here than the aid budget alone. For example, consider the topical subject of today’s spending teview. There is talk of tax rises from the Institute of Fiscal Studies, and many others.

“We will not raise the rate of income tax, VAT or national insurance,” the manifesto also said. But those three taxes between them account for almost two-thirds of the tax take. Capital, property and corporation taxes raise about a quarter.

So if the chancellor judges large-scale tax rises necessary at some point, why should he stick to the former rather than raid the latter, too – using exactly the same arguments about necessity as would be deployed in relation to aid?

From the Daily Mail’s John Stevens

As my colleagues Matthew Weaver and Denis Campbell report, some Conservatives in London are opposed to the idea of the capital being treated as a single unit when the government decides whether it will go into tier 2 or tier 3. They want a borough by borough approach instead.

As Tom Tugendhat reveals, some Kent Tory MPs are now making the same argument.

Boris Johnson reveals he has been writing to eight-year-old Monti to assure him that the coronavirus pandemic won’t stop Santa visiting this Christmas.

One day, of course, Monti will join the EU (see 10.02am) and many, many others in realising that the word of Boris Johnson is not always reliable, but this particular fib may be more forgivable than most.

Updated

Sunak tells cabinet OBR figures about economic damage from Covid will be 'sobering read'

Cabinet met this morning (as is usual before a budget or a spending review) and Rishi Sunak, the chancellor, told his colleagues that the OBR forecasts showing the impact of the coronavirus crisis on the economy would be a “sobering read”. A No 10 spokesman said:

Cabinet was told the OBR forecasts will show the impact the coronavirus pandemic has had on our economy and they will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels.

But, as the IMF, OBR and others have pointed out, the costs would have been much higher had we not acted in the way we have done.

According to the spokesman, Sunak also told cabinet the spending review had three priorities.

1. To protect people’s lives and livelihoods providing the support they need to get through Covid.

2. To make good on our promise to deliver strong public services by investing in schools, hospitals our police force and more.

3. To deliver our record investment plans in infrastructure to level up and spread opportunity across the United Kingdom. Our plan is to deliver the highest sustained levels of govt investment in almost half a century.

And Boris Johnson told cabinet that the government would “work tirelessly on job creation, driving economic recovery and building back better”, No 10 said.

Rishi Sunak working on his spending review speech in his office in 11 Downing Street yesterday.
Rishi Sunak working on his spending review speech in his office in 11 Downing Street yesterday. Photograph: Simon Walker/HM Treasury

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EU willing to be 'creative' in final 'decisive days' for trade deal with UK, says commission president

Ursula von der Leyen, the president of the European commission, has been speaking to MEPs this morning about the UK-EU trade talks. Here is the text of her speech.

And here are the main points.

  • Von der Leyen said these were “decisive days” in determining whether or not there would be a deal. She said:

These are decisive days for our negotiations with the United Kingdom. But I cannot tell you today, if in the end there will be a deal.

  • She said the outline of a possible deal was in place. She said:

There has been genuine progress on a number of important questions: on law enforcement and judicial cooperation; on social security coordination. And also on goods, services and transport we now have the outline of a possible final text. In these areas there are still some important issues to agree, but they should be manageable.

  • She said the EU was willing to be “creative” in relation to the remain problems. She said:

The crucial topics for the European side are of course questions linked to the level playing field, governance and fisheries. With very little time ahead of us, we will do all in our power to reach an agreement. We are ready to be creative.

  • She said she the EU wanted legal guarantees that the UK would abide by its level playing field commitments. And she suggested that internal market bill row (the EU has strongly objected to the way it would allow the UK to ignore parts of the withdrawal agreement) has made this even more important. She said:

In the discussions about state aid we have still serious issues, for instance when it comes to enforcement. Significant difficulties remain on the question how we can secure – now and over time – our common high standards on labour and social rights, the environment, climate change and tax transparency.

We want to know what remedies are available, in case one side will deviate in the future. Because trust is good, but law is better. And crucially, in light of recent experience: a strong governance system is essential to ensure that what has been agreed is actually done.

Ursula von der Leyen addressing the European parliament in Brussels this morning.
Ursula von der Leyen addressing the European parliament in Brussels this morning. Photograph: Anadolu Agency/Getty Images

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From Andy Burnham, the Labour mayor of Greater Manchester

People bereaved by Covid-19 have warned that allowing families in the UK to get together over Christmas is “sheer madness” and urged the public to have a low-key festive period rather than risk the grief they have endured, my colleague Robert Booth reports.

From the Times’ Steven Swinford

Good morning. Rishi Sunak, the chancellor, will be delivering his spending review this afternoon and he will be hoping it turns out to be more robust than most of the other big financial announcements he has made this year. On 11 March, when he presented his budget, he announced spending worth £12bn to help businesses cope with coronavirus. Less than a week later those plans were effectively in tatters and he was back announcing a support package of loans and grants worth £350bn. That pattern has been repeated several times this year. Ensuring that economic policy stays ahead of events has turned out to be near impossible.

That is why the spending review has been scaled back already. Originally it was meant to determine government spending for the next three years (which is normal for a spending review). Instead it is largely going to be a one-year review because, with so much uncertainty about what the economy will look like next year, making long-term plans would be rash.

As is normal for a big financial statement like this, key elements have already been briefed already. Here is a good summary from my colleague Richard Partington.

But much of the interest this afternoon will be not on what’s in the spending review document (the government’s plans) but on what’s in the Office for Budget Responsibility’s assessment of the state of the economy. According to Lord Ashcroft’s thorough, fair and very useful new biography of Sunak, Going for Broke, the chancellor is a big fan of statistics and is fond of quoting a maxim from his entrepreneur father in law, Narayana Murthy. The book quotes Sunak as saying:

One of my favourite quotes of his [Murthy’s] is: ‘In God we trust, but everyone else needs to bring data to the table.’ It’s something I try to live by as well. You know, I’m always interested in getting the data; getting the facts.

Well, we’re all going to get the data this afternoon, and it is expected to be very grim indeed.

It is normally hard for the opposition to get much attention on the day of a big Treasury statement like this, but Labour has launched a pre-emptive strike overnight by accusing the government of creating a “jobs crisis”. In a statement Anneliese Dodds, the shadow chancellor, said:

The Conservatives’ irresponsible choices have wasted and mismanaged billions, led to our country experiencing the worst downturn in the G7, and created a jobs crisis.

Whether it’s building starter homes or garden bridges, this prime minister and his government talk a good game. But they haven’t delivered on their promises - and regional inequality has got worse under their watch.

They clapped for key workers – but now they’re freezing their pay, and looking to scrap planned minimum wage increases for the private sector. That will hit people’s pockets and pull spending out of our small businesses and High Streets when many are already on their knees.

Instead, we need a relentless focus on jobs and growth to get the economy back on its feet. The government must act to recover jobs, retrain workers and rebuild business, as part of a longer-term plan to make our country the best place in the world to grow up in and to grow old in.

Here is the agenda for the day.

9.30am: HMRC publishes statistics for the Eat Out to Help Out scheme.

12pm: Boris Johnson faces Sir Keir Starmer at PMQs.

12.30pm: Rishi Sunak, the chancellor, delivers his spending review.

1.30pm: The Office for Budget Responsibility publishes its latest forecasts.

2.30pm: The OBR holds a press conference.

Politics Live has been doubling up as the UK coronavirus live blog for most of this year but today, although I will be covering the latest Covid developments, I will mostly be focusing on the spending review.

Here is our global coronavirus live blog.

I try to monitor the comments below the line (BTL) but it is impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer questions, and if they are of general interest, I will post the question and reply above the line (ATL), although I can’t promise to do this for everyone.

If you want to attract my attention quickly, it is probably better to use Twitter. I’m on @AndrewSparrow.

Rishi Sunak working on his spending review speech in his office at 11 Downing Street yesterday.
Rishi Sunak working on his spending review speech in his office at 11 Downing Street yesterday. Photograph: Simon Walker/HM Treasury

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