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

Liz Sugg, minister for the overseas territories and sustainable development quits; nurses, doctors and NHS workers to get pay rise. This live blog has closed – please follow the global live blog for coronavirus updates

Related: Spending review 2020: Rishi Sunak’s key points at a glance

Related: Sunak offers jam today in spending review as Covid deficit spreads

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.

Related: Coronavirus live news: global cases exceed 60m; the Americas record worst week since pandemic’s start

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.

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.

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.

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.

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

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.

“It is completely incomprehensible that the Government is not increasing the public health grant” ADPH president, @JeanelleUK responds to the announcement of today’s Spending Review. https://t.co/6R8nMHIgcL pic.twitter.com/23mTPvhznb

It appears there will be no rise in the public health grant for 2021/22. #SpendingReview2020 documents > https://t.co/0FH5SmvVGg pic.twitter.com/VCMR3UIm1y

Sunak’s settlement going down awfully on Covid frontline: directors of public health via @Jeanelleuk
attack lack of £ increase as “completely incomprehensible” while care homes via @vicrayner says the offer is “a catastrophe for social care”.

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

We were told this would be a one-year spending review – it’s not. We were told @RishiSunak would make jobs the ‘number one priority’ – he hasn’t. A quick thread on the employability side of today’s #SpendingReview https://t.co/5hR544xfLS

First up, the disappearing £2.9 billion. The newly announced ‘Restart’ scheme to support unemployed people is supposed to be worth £2.9bn, but only £0.4bn is going to be spent in the next 18 months. Presumably the rest will be in subsequent years -a classic announcement fudge. /2 pic.twitter.com/flLI7fxCG0

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.

Related: Sunak’s spending review and Christmas “baubles”: Politics Weekly podcast

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.

“We think the OBR’s forecasts are underplaying the effect of vaccines on economic activity which would go along way to filling any fiscal hole.” — @CapEconUK on #SpendingReview #SR2020

Rishi Sunak was right to say today that now is not the time to tighten fiscal policy. But given the OBR’s downbeat forecasts, the biggest danger is that the government is lured into withdrawing its support too much too soon. https://t.co/4YW0bUVKdS pic.twitter.com/moLUNO0Dul

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.

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.

From our colleague Heather Stewart

Tory lockdown sceptics are sharing this, from today’s OBR report: its central scenario, cited by Sunak, involves a “less effective” test and trace system; tier 2-type lockdown across England until Spring; and vaccine not widely available until “the latter half” of 2021: pic.twitter.com/OihUha05XT

MPs say this suggests both that the government is not being open about how tough the next three months could be; but also that there is a significant economic upside to eg cracking test, trace and isolate [the OBR has pointedly not dropped the “Isolate” bit].

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.

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.

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.

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.

Listen to the Chancellor’s reply to my Q – reveals the “rise” he promised low paid public sector workers (inc frontline key workers) is a flat rate £250 & mostly less than 2% inflation forecast. Means low paid workers face a real pay CUT. Why isn’t he being straight with people? pic.twitter.com/bgN5mxRtQW

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Am intrigued about this – feels like a bit of a departure, as OBR usually says it will only model government policy (i.e to secure a deal) – is it because we’re so close to the cliff edge? https://t.co/EFJUgk1ylP

The OBR have finally modelled the apocalyptic “pandemic, plus no-deal Brexit” scenario, and it makes for ugly reading.

The tale of woe begins on p. 194 of the much longer document. FTA = 4% GDP damage vs EU membership. WTO = 2% *more* damage.https://t.co/TCTsGWJaFX pic.twitter.com/3orZ0Qrpq1

No-deal Brexit will delay Covid recovery by a year to 2023, bleak OBR report warns:
– up to 6% hit to economy (4% leaving EU, 2% extra no deal)
– prices rising 1.5%
– industries that did ok in Covid suffering worst Brexit impacthttps://t.co/slxnxNgrgt

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.

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

This will be totally corrupt. Banana republic territory. https://t.co/e6AjB9qcsJ

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.

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.

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 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:

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.

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.

Sadly I have resigned from Government today. Here’s my letter to the PM pic.twitter.com/hWwPtBuH6v

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.

From the Nobel laureate Malala Yousafzai

I am deeply disappointed @BorisJohnson and @RishiSunak that you chose to abandon the UK’s 0.7% pledge to aid – when a generation of girls are leaning on that support.

I hope you will think again, find a way to reverse the cuts and protect girls education.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The state will be over 56% of GDP this year – highest outside World War Two. And it will still be 42% in middle of the decade (basically 2% up vs pre-pandemic) pic.twitter.com/WY5MRUKLBx

Good on the @OBR_UK for doing a no deal Brexit scenario for the first time. Short version: it would knock another 2% of GDP both next year and permanently (for slightly different reasons). Note this = the extra impact on top of hit they’ve already built in for a negotiated Brexit pic.twitter.com/QeXZQfDLtj

The big picture of this Spending Review is 1) HUGE covid spending this year and next 2) the beginning of attempts to quietly adjust longer term spending plans for world of a smaller economy (£10bn cut from public services, optimistically assume NO covid spend become permanent).

Chancellor has won the battle with no10 to continue to pretend that he’ll cut £1000 from the incomes of 6 million households. Might flatter the forecasts today, but in the end this benefit cut will be scrapped so giving families such uncertainty is a long way from okay

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.

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.

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.

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.

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”.

The cut to the overseas aid budget is a political gesture to the right wing of the Tory party, and the price of it will be paid by some of the poorest people in the world. Deplorable indeed. https://t.co/tiZtS3esrN

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

Perhaps most important news today.

OBR: “SR decisions reduce borrowing through the £10-12 bn cuts to departmental resource spending relative to March Budget totals”.

So all numbers today assume we will need less spending after next year than expected in March.

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

Here are the new @OBR_UK annual GDP growth forecasts. Summary – slightly better than the outlook back in July, but in a different world to the pre-crisis forecasts back in March #SpendingReview2020 pic.twitter.com/5Z2kGNFO86

The @OBR_UK cumulative borrowing expectations over the course of this parliament (2019-20 to 2024-25) now stand at £892bn. #SpendingReview2020 pic.twitter.com/P3R5OAVY6x

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.

For almost 60 years, the UK’s West Africa Squadron fought the evil of slavery. At its height, costing 2 percent of the national budget on fighting slavers at sea. We’ve always known that foreign aid protects our values and extends our influence.

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.

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.

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.

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

Today’s @OBR_uk forecast puts the total cost of the government’s total coronavirus response at £280 billion in 2020-21, £88 more than their previous estimate from July. pic.twitter.com/k43Qn7UseR

In today’s forecasts, enduring weakness in the economy leads to borrowing in 2024-25 remaining £42 billion above the level expected back in March. pic.twitter.com/Ie7rXQNFd8

The collapse in economic activity and government’s emergency measures have caused a sharp increase in debt as a share of national income. @OBR_UK forecast that debt will continue to rise gently, leaving it at 98% of national income at the end of the forecast period in 2025-26. pic.twitter.com/mHbKhLtOvT

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).

At last we have a Conservative Chancellor that understands Conservative voters on foreign aid.

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 …

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.

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

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

The cut in the aid budget – made worse by no set date for restoration – is shameful and wrong. It’s contrary to numerous Government promises and its manifesto.

I join others in urging MPs to reject it for the good of the poorest, and the UK’s own reputation and interest.

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.

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.

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.

Sunak says UK economic decline expected to be 11.3% this year: that’d be the second-sharpest in Europe pic.twitter.com/4W7kG5ee9h

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

Related: Sunak announces record peacetime borrowing to combat historic downturn

Related: Spending review 2020: Rishi Sunak’s key points at a glance

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.

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.

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.

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.

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.

The Treasury has just published all the spending review documents on its website.

Here is the main 120-page spending review book (pdf).

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.

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.

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.

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.

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

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

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.

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.

2020 GDP forecast from @OBR is -11.3% – worst since 1709 #spendingreview pic.twitter.com/opT7lgpUur

#Sunak reports #OBR now sees #UK #GDP contracting 11.3% in 2020 then growing 5.5% in 2021, 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 & 1.8% in 2025. #Economy not seen back to its Q4 2019 level until Q4 2022. Economy in 2025 will be around 3% smaller than expected in March

Sunak wasn’t wrong about the sobering figures:

GDP down 11.3 percent this year.

Most significant fall in output in 300 years.

Will borrow 19% of GDP – highest levels in peacetime.

Sunak announces an extra £2.2bn for schools.

Increasing the schools budget by £2.2bn in 2021-22, and a commitment to rebuild 500 schools over the next decade. #SpendingReview pic.twitter.com/mswwyBOHmW

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.

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

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

The new £2.9bn Restart Scheme to help more than one million unemployed people look for work. #SpendingReview pic.twitter.com/qyNl05EeIC

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.

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%.

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

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

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.

From Politico’s Emilio Casalicchio

I’m told Baroness Sugg, who is on resignation watch over an expected cut to the aid budget (h/t @alexwickham,) was down to answer a Q on aid at 1pm in Lords. But another peer (Lord Parkinson) is now answering it.

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.

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”.

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.

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.

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.

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.

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.

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.

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.

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.

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.

From the Daily Mail’s John Stevens

City Hall sources think it is 50:50 whether London will go into Tier 2 or 3…. “it is in the balance”

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.

Related: London Tories split over tiered approach after Covid lockdown

Kent MPs want to see Covid restrictions at a borough / district level. The differences across the county are large and communities need to be treated appropriately. pic.twitter.com/hkGanKToT6

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.

Monti (aged 8) wrote to me asking if Father Christmas will be able to deliver presents this year

I’ve had lots of letters about this, so I have spoken with experts and can assure you that Father Christmas will be packing his sleigh and delivering presents this Christmas! pic.twitter.com/pXwcjHSxZg

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.

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.

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.

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.

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.

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.

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.

From Andy Burnham, the Labour mayor of Greater Manchester

Three million people excluded from the Chancellor’s support schemes will be hanging on his every word today.

It’s no exaggeration to say jobs, homes, marriages and lives depend on what he’s got to say.

Please, @RishiSunak, listen to their cries for help and do the right thing. https://t.co/kFBOlaJFcX

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.

Related: Families bereaved by Covid say UK plan to allow Christmas mixing is ‘sheer madness’

From the Times’ Steven Swinford

The OBR’s forecast will not just look at the impact of coronavirus on the economy today

It also includes a scenario showing the impact of a no-deal Brexit vs the central forecast, which anticipates a deal

It will also include a coronavirus ‘upside’ & ‘downside’ scenario

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.

Related: What will be in Rishi Sunak’s mini-budget?

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.

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.

Related: Coronavirus live news: global cases near 60m as France prepares to ease lockdown

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