Spending Review: Unemployed predicted to rise to 2.6 million

The number of unemployed people in the UK is expected to surge to 2.6 million by mid-2021, Rishi Sunak has warned.

In his Spending Review, the chancellor said the UK's "economic emergency" had "only just begun".

The government expected to borrow £394bn this year - the "highest" level "in our peacetime history" - he added.

The latest figures show 1.62 million people are unemployed, a number which has risen by more than 300,000 since last year,

In the House of Commons, Mr Sunak said the government would spend £280bn this year "to get our country through coronavirus".

He also announced that public sector pay would be frozen, except for the lowest paid, as well as nurses, doctors and other NHS staff who will get a salary rise.

And the chancellor said spending on overseas aid, as a proportion of national income, would be 0.5% in 2021-2 - down from the 0.7% currently set in law.

The last time UK unemployment was as high as 2.6 million was in May to July 2012.

The number exceeded three million from 1983 to 1987 and for a few months in early 1993.

Mr Sunak told MPs the economy was predicted to contract by 11.3% - "the largest fall in output for more than 300 years" - and grow by 5.5% next year and 6.6% in 2022.

He added: "Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022. And the economic damage is likely to be lasting."

The government's Covid response, including furlough, has led to huge spending rises, at a time when its income from taxation is down.

Mr Sunak said the UK was expected to borrow £394bn this year, which was predicted this would fall to £164bn next year and £105bn in 2022-3.

Some Spending Review announcements were trailed before his statement, including:

Mr Sunak said: "The spending announced today is secondary to the courage, wisdom, kindness and creativity it unleashes.

"These are the incalculable but essential parts of our future, and they cannot be mandated or distributed by government. These things must come from each of us, and be shared freely, because the future, this better country, is a common endeavour."

The chancellor had intended - as usual - to set out plans for the next three years, but this was reduced to just one year due to the economic turmoil caused by the pandemic.

For Labour, shadow chancellor Anneliese Dodds said a longer-term spending review was needed soon "to build a future for our country as the best place in the world to grow up in and the best place to grow old in".

She criticised Mr Sunak for not mentioning Brexit in his speech, with the UK set to leave the EU single market and customs area at the end of the year.

She added: "There's still no trade deal. So does the chancellor truly believe that his government is prepared and that he's done enough to help those businesses that will be heavily affected?"

Dave Prentis, general secretary of the union Unison, called the pay freeze for most public sector workers "austerity, plain and simple" and a "bitter pill" for those affected.

He added: "A decade of spending cuts left public services exposed when Covid came calling. The government is making the same disastrous mistake again."