Rishi Sunak to set aside £50bn to 'get through' pandemic

Rishi Sunak will this week set out billions of pounds of public spending which he will say will "get the country through" the coronavirus pandemic, while warning that harder decisions are coming in the spring.

A fund of up to £50 billion will be set aside to deal with Covid-19 in this week's Spending Review, and big decisions on social care and reforming higher education will be delayed by a year.

But the Chancellor will not hide the state in which the economy has been left by the pandemic.

“People will see the scale of the economic shock laid bare. We can see the data every month, and obviously the shock that our economy is facing at the moment is significant," he told The Sunday Times.

The review has been radically cut back from the three-year plan which Boris Johnson, the Prime Minister, had hoped to use to cement a legacy of his first term.

Government capital spending will be higher than Mr Sunak had planned to spend in 2021/22 at last March's Budget, while overall public spending will increase.

He will also set aside a Covid support fund – estimated by the Resolution Foundation to be £50 billion – to support departments through the crisis and stop them cutting services to find money to battle the pandemic.

Sources described the cash as a "getting Britain through" fund and would cover the four months until the end of March as well as the following tax year.

Mr Sunak will also announce a £500 million package to support mental health services with most of the money planned for specialist services for young people, including in schools, and support for NHS workers.

One of the themes will be supporting jobs through the next 15 months with officials expecting a spike in the unemployment rate when the furlough scheme stops in March.

The review will confirm a public sector pay freeze while signalling that billions of pounds of infrastructure spending will be given the go-ahead.

However, the Chancellor will make clear that a hiring programme for the police and staff at the Department for Work and Pensions will continue. One source said: "We need to get jobs next year."

Major cuts in department spending – such as a possible recruitment freeze to run alongside a likely public sector pay freeze – will be put off while the UK navigates through the pandemic.

A decision on whether to make a £20-a-week increase to universal credit permanent from the end of April has also been shunted to the new year.

The newly-merged Foreign Office and Department for International Development will be given a smaller combined budget which is expected to lead to savings in back offices, however.

One source said ministers wanted to put "more resources into Britain overseas by cutting on duplication at home".

The aid budget is also likely to be cut by £4 billion from 0.7 per cent of GDP to 0.5 per cent of GDP, which will trigger a row with some Conservative backbenchers.

Last night, Damian Green, the chairman of the One Nation caucus of moderate Tory MPs, told Boris Johnson in a letter seen by The Telegraph: "Any revision down on the 0.7 per cent of our GDP, as enshrined in our law and in our 2019 manifesto, however beneficial in the short term, will have negative repercussions.

"There are difficult decisions ahead, but we must not balance the books on the backs of the poorest around the world."

On Saturday night Mr Sunak announced a £500 million package to support mental health services as part of measures to recover from the coronavirus crisis.

The Treasury said he will pledge the new funding in his spending review on Wednesday, when he will also deliver his long-term plan for infrastructure investment.

Mr Sunak said: "The pandemic has had a major impact on mental health because of increased isolation and uncertainty.

"So it is vital we do everything we can to support our mental health services and ensure help is there for people.

"This funding will make sure those who need help get the right support as quickly as possible so they don't have to suffer in silence."

Mr Sunak will also overhaul the Treasury's "green book", a set of rules to determine the value of Government schemes which is thought to favour London and the South East of England.