Rishi Sunak’s spending plan will push more families into poverty, charities warn

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The effects of Rishi Sunak's "short-sighted" Spending Review will plunge more children into poverty and push more families towards financial ruin, campaigners have warned.

Anti-poverty charities say vulnerable children and families were "at the back of the queue" in the Chancellor's bleak financial outlook which revealed the "economic emergency" caused by coronavirus has only just begun and there will be "lasting damage".

Millions of minimum wage workers are to get a pay rise of just 19p an hour, two million people will see their benefits climb by only 37p a week, and the Chancellor did not commit to extending the £1,000 Universal Credit uplift.

Action for Children said a generation of kids are at risk of being "scarred by poverty", while the End Child Poverty coalition said 2020 will end "with the Dickensian image of children holding out empty plates begging the Government for more".

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Anti-poverty charities have criticised the Chancellor's Spending Review
(Image: REUTERS)

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Amid record peacetime borrowing and soaring national debt, Office for Budget Responsibility (OBR) expects unemployment to peak at 7.5 per cent in the second quarter of 2021 – 2.6 million people.

The Chancellor announced that NHS doctors and nurses will receive a pay rise, but pay rises in the rest of the public sector will be "paused" next year.

The 2.1 million public sector workers who earn below the median wage of £24,000 will be guaranteed a pay rise of at least £250 next year, however.

And the National Living Wage will increase by 2.2 per cent or 19p to £8.91 an hour.

Anti-poverty charities said there weren't enough measures to help the UK's most vulnerable residents.

Children 'at back of queue'

Imran Hussain, director of policy and campaigns at Action for Children, said: “This should have been a Spending Review about lives, livelihoods and life chances.

"Like every other spending review of the past decade, children have been put to the back of the queue, today.

"And like every other spending review of the past decade, the effect of this short-sighted approach will be seen in rising child poverty and greater pressure on a whole range of public services including schools, the NHS and council-run child protection services.

Charities say more families will be under financial pressure (stock photo)
(Image: Getty Images/iStockphoto)

“It’s not right that low-income families face a £1,000 cut to their Universal Credit help from next year – adding even more stress to a second lockdown, the arrival of winter and with Christmas around the corner.

"The Government must put this right now to prevent a generation of children from being scarred by poverty and the pandemic, which would carry significant long term costs to the public finances.”

Fears £20 weekly lifeline will be cut

Judith Cavanagh, a coordinator with the End Child Poverty coalition, said she was "deeply disappointed" that the Government failed to extend the £20 weekly lifeline uplift.

She said: "The Chancellor made a promise to protect livelihoods, that is not being met for families with children.

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"Today was an opportunity to offer those families some hope. Instead we end 2020 with the Dickensian image of children holding out empty plates begging the Government for more.

"With no indication that the Government intends to keep the £20 uplift for Universal Credit and continuing to ignore the plight of those on legacy benefits the Government has missed the opportunity to signal its intention to get to grips with the scale of child poverty in the UK, which will have been made worse by the pandemic.

"With a vaccine on the horizon and the hope it brings for a return to normal life it’s not right that millions of children in the UK will continue to be trapped in poverty, denied the opportunity to freely enjoy their childhoods with good physical and mental health, to thrive at school and foster ambitions for the future.

"We urge the Government, in the coming months, to set out a credible plan for how it intends to keep its manifesto commitment to reduce child poverty and to ensure that children in low income families are fully able to realise a brighter, post-Covid future.

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"It is not possible to develop a vaccine against child poverty. It is however possible to find a cure."

Families to spend winter 'in fear'

Helen Barnard, director of the Joseph Rowntree Foundation, said “weaker” local economies will receive less money than previously in the aftermath of the Covid-19 crisis, as she described the economic forecast as “deeply troubling”.

She said: “Behind the figures there are real families wondering how they will get through this winter and beyond. The Chancellor has not risen to the challenge facing the nation.

“In the here and now families need to know how they will pay for food, childcare and keep a roof over their heads.”

Ms Barnard said Mr Sunak failed to live up to a manifesto commitment to invest “significantly” in skills around the UK.

She added: “This was a moment when the Chancellor could have taken action to solve poverty – instead many families will now be preparing for still harder times ahead.”

She said it was “deeply disappointing” the Government failed to guarantee that it won’t cut the lifeline for people on Universal Credit in April.

Those recipients will now have to “wait out the winter in fear and uncertainty”.

Ms Barnard said the Chancellor should have committed to increase the supply of social housing.

“The decision to freeze help with housing costs risks pushing families into poverty and takes away the link to real rents when calculating uplifts,” she added.

Mark Russell, chief executive at The Children’s Society, said: “Years of under investment in children’s social care, mental health, schools and employment have left a generation struggling with low well-being, deepening poverty and inequality and increasing rates of mental ill-health.

“We are pleased that an extra £300million is being given to social care and a further £3billion to help local authorities get through Covid. However, this isn’t a long-term solution to help a system that was already struggling and has faced £2.2billion in cuts to children’s social care funding alone over the last decade.

“The chancellor rightly spoke of how the individual, the family and the community must become stronger, healthier and happier in this country, but today’s announcement did not provide the strategy needed to genuinely improve the lives of the most vulnerable children in the long-run.

“The government must do more to level-up and build a brighter future for generations to come.”

What was in the Spending Review?

The economic emergency caused by coronavirus has only just begun and there will be "lasting damage" to the UK, the Chancellor said as he set out his Spending Review.

Official forecasts showed the UK economy was expected to shrink by 11.3% this year, the worst recession for more than 300 years.

Mr Sunak told MPs that the Office for Budget Responsibility did not expect the economy to return to its pre-crisis levels until the end of 2022 and the damage was likely to last.

The "long-term scarring" would mean that in 2025 the economy will be around 3% smaller than expected in March.

Mr Sunak delivered his one-year Spending Review in the Commons
(Image: PA)

Mr Sunak said: "Our health emergency is not yet over. And our economic emergency has only just begun.

"So our immediate priority is to protect people's lives and livelihoods."

The OBR forecasts show a recovery is expected over the coming years, with growth of 5.5% forecast next year as coronavirus restrictions are eased, then 6.6% in 2022, 2.3% in 2023, 1.7% in 2024 and 1.85 in 2025.

The Government will borrow an eye-watering £394 billion this year, equivalent to 19% of GDP – the highest ever recorded in peacetime.

Although borrowing will subsequently fall, the national debt is forecast to reach 97.5% of GDP in 2025-26.

"This situation is clearly unsustainable over the medium term," Mr Sunak admitted.

While Mr Sunak continued to allocate large sums to tackling the ongoing emergency he confirmed there would be restraint in pay awards for public sector workers and a cut in overseas aid.

The Chancellor said he "cannot justify a significant, across-the-board" pay increase for all public sector workers in the circumstances.

Over a million nurses, doctors and others working in the NHS will get a rise but pay rises for the rest of the public sector will be "paused" – except for the 2.1 million workers earning below the median wage of £24,000, who will receive an increase of at least £250.

The cut to the aid budget sees the Government reneging on a legal pledge and manifesto commitment to spend 0.7% of national income on development assistance.

Mr Sunak said: "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."

Instead of the existing target, Mr Sunak said 0.5% would be spent in 2021, around £10 billion.

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The Government faced condemnation from charities and criticism from senior Tories about the move.

But Mr Sunak insisted that "at a time of unprecedented crisis government must make tough choices" and promised that spending would return to 0.7% "when the fiscal situation allows".

According to the OBR forecasts, unemployment is set to soar to 7.5% in the second quarter of 2021 – with 2.6 million people out of work – falling to 4.4% by the end of 2024.

The Chancellor set out a nearly £3 billion Restart programme to help get people back into work.

For those in work, the national living wage will increase by 2.2% to £8.91 an hour – lower than the £9.21 rate previously expected from April 2021.

Mr Sunak said £280 billion was being spent on the coronavirus response this year.

Next year some £55 billion was earmarked for public services dealing with the crisis, including an initial £18 billion for testing, personal protective equipment and vaccines.

Despite the dire national finances, total departmental spending will be £540 billion in 2021-22, a £14.8 billion rise in cash terms.

Over this year and next, day-to-day departmental spending will rise, in real terms, by 3.8% – the rate in 15 years.

The Scottish Government's funding will increase by £2.4 billion, Wales will receive £1.3 billion and there is £0.9bn for the Northern Ireland Executive.

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