‘Our economic emergency has only just begun’

Chancellor of the exchequer Rishi Sunak addresses a socially-distanced House of Commons

Amid falling output and rising unemployment, the chancellor of the exchequer set out his Spending Review for 2021/22.

“Our economic emergency has only just begun,” he said. “So our immediate priority is to protect people’s lives and livelihoods.”

Among the new measure is a £4bn pot called the Levelling Up Fund – local authorities can apply for project funding in competition with each other – and a £7.1bn National Home Building Fund (which is on top of the £12.2bn Affordable Homes Programme).

Yesterday also saw the publication of the long delayed National Infrastructure Strategy, a 100-page document fleshing out government policy on infrastructure and construction, including broadband, energy and transport. [See our separate report here.]

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The Office for Budget Responsibility, which provides independent and authoritative analysis of the UK’s public finances, forecast the economy will contract this year by 11.3%, the largest fall in output for more than 300 years. As restrictions are eased, it expects the economy to start recovering, growing by 5.5% next year, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years. But it will take two years, until the fourth quarter of 2022, for UK economic output to return to pre-crisis levels.

Against this background Rishi Sunak is injecting a fiscal stimulus of £100bn capital spending next year – “£27bn more in real terms than last year,” he said. That a 37% increase in capital spending.

To help finance the plans, a new UK infrastructure bank is being set up somewhere in the north of England. “The bank will work with the private sector to finance major new investment projects across the UK – starting this spring,” the chancellor explained.  

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