British Finance Minister Rishi Sunak has said the government will end up borrowing a peacetime record of almost £400bn this year ( or 19% of the country's GDP) as it seeks to fight the worst recession in more than 300 years.
Appearing before MPs, the Chancellor of the Exchequer said that while the pandemic induced health emergency was not yet over, the economic emergency was only just beginning.
Citing forecasts from the government’s tax and spending watchdog OBR (Office for Budget Responsibility) in his address, Sunak said the economy is set to contract by 11.3% this year, calling it the largest fall in output for 300 years. The economy is forecast to recover by 5.5% in 2021.
Even as growth is forecast to return in the coming years, economic output would not go back to pre-crisis levels until the fourth quarter of 2022, and the economic damage from COVID-19 was likely to be lasting. OBR added that the lasting damage caused by the pandemic would be exacerbated by a further 2% hit to growth in the event of a ‘no-deal’ Brexit.
Sunak said the UK faced an “economic emergency” warranting a cut in international aid and a public sector pay freeze for millions, with an exemption for NHS staff and workers earning less than £24,000 per year. Sunak said that 2.1 million lowest paid workers would get a £250 (€280) minimum rise.
Unemployment is projected to rise to 7.5%, Sunak said, before falling to 4.4% by the end of 2024.
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