SR Delivers Dour Outlook, But 'Rabbit From The Hat' In Levelling-Up Fund

With the statement from Chancellor Rishi Sunak on the Spending Review now concluded, the main takeaway is that the gov't is attempting to soften the blow of what are some extremely downbeat economic projections.

• The Office for Budgetary Responsibility forecast the economy will contract this year by 11.3%, the largest fall in output for more than 300 years. This is forecast to be followed by growth of 5.5% next year, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years.
• Unemployment forecast to rise to 7.5%, equating to 2.6mn individuals. This is the highest rate of unemployment since July- Sep 2013, and the highest number of people out of work since Feb-Apr 2012.
• The two most politically controversial parts of the spending review will be the freeze to public sector pay, and the reduction in the aid budget.
• On the former, Sunak says that an across-the-board public sector pay rise at a time when private sector jobs are disappearing and wages falling is not justified. Those in NHS and earning under 24k will get a rise though.
• On aid, Chancellor says "But during a domestic fiscal emergency, when we need to prioritise our limited resources on jobs and public services… …sticking rigidly to spending 0.7% of our national income on overseas aid, is difficult to justify to the British people… …especially when we're seeing the highest peacetime levels of borrowing on record."
• At the end, he reveals the 'rabbit from the hat' moment, a 'levelling up fund' of GBP4bn for towns to improve themselves. Likely to play well in many of the 'red wall' seats in northern England (and indeed many towns in the traditional Conservative heartlands of the south as well).