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

• Rishi Sunak has said the government will borrow a peacetime record of almost £400bn this year as it seeks to combat the worst recession in more than 300 years. He confirmed the figure in a statement to MPs setting out his spending review for 2020. Here is a summary of the key points.

And here is an analysis from our colleague Larry Elliott.

• The government will need to find up to £27bn worth of spending cuts or tax rises by 2024 to put the public finances on a sustainable footing, the Treasury’s spending watchdog has warned.

• Boris Johnson was struggling to contain a Conservative revolt as a Foreign Office minister resigned after the chancellor, Rishi Sunak, announced he was breaking a manifesto promise by cutting the overseas aid budget by a third and ending the Tory commitment to spend 0.7% of gross national income on aid.

• The UK has recorded 696 further deaths - a new record for the second wave of the pandemic and the highest daily total since early May. (See 5.49pm.) Deaths are always a lagging indicators, and UK case numbers continue to fall, but the figure serves as a reminder of the seriousness of the second wave on the eve of the announcement from the government about which areas in England are going into which tiers when the lockdown ends next week. Some governnment figures have been claiming that the whole of the country could end up in tiers 3 or 2, the two tiers with the strictest rules. This evening the Office for National Statistics has announced that it will publish its weekly coronavirus infection survey, which is regarded as one of the best guides to the prevalance of coronavirus in the community, tomorrow at 10.30am, instead of Friday at 12pm at usual. The govenrment has promised to release data justifying its decisions about which areas are going into which tiers, and that may explain why the ONS publication has been moved forward. In its announcement about the revised release time the ONS said:

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.

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That’s all from us for tonight. But our coverage continues on our global coronavirus live blog. It’s here.

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.

From Caryl Roberts, executive director of the IPPR

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.

The chancellor has acted too timidly, and in doing so has failed to live up to the scale of the challenge. He has missed an opportunity to build not just a stronger economy but one that is fairer and greener. And, ironically, he will find it harder to achieve fiscal sustainability as a result, because tax receipts reflect the state of the economy.

From Torsten Bell, chief executive of the Resolution Foundation

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.

The idea that there will be no permanent increase in spending post-pandemic is what you might politely call optimistic. It is certain that tax rises will end up playing a bigger part in any real plan to put the public finances on a sustainable footing once the recovery is secured.

From Robert Colvile, director of the Centre for Policy Studies

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 UK has recorded 696 further deaths - the highest daily total since early May. And there have been 3,261 deaths over the past seven days - a 12% increase on the total for the previous week.

• The UK has recorded 18,213 further positive cases. That is a big increase on yesterday (11,299) and the day before (15,450) but over the last few weeks the trend for case numbers has shown a clear decline.

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.

Rob Booth reported earlier that care home providers said Sunak had left a “black hole” in social care budgets.

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

And it includes this.

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.

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.

That would allow the deficit to return to close to its pre-virus levels by 2024/25.

Moreover, we expect the economy to get back to its pre-virus trend later in the decade. And low borrowing costs means that the government can take time to let economic growth fill the hole.

OBR chair Richard Hughes has confirmed that the watchdog has the Pfizer and Moderna vaccine trial results when it finalised its report, but not AstraZeneca’s (as we flagged earlier).

The AstraZeneca/Oxford University results are “certainly good news”, Hughes told the OBR’s press conference. But the ‘full fan’ of scenarios (from a rapid vaccine rollout, to no effective vaccine) are equally possible.

Hughes says:

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.

But huge uncertainly remains, these are all trials, we have yet to see how any of these vaccines perform in the field, he adds.

25 Nov 202012.13 EST

Sunak delays switch away from RPI inflation measure for index-linked gilts

Hilary Osborne

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.

Rishi Sunak instead delayed it until 2030, giving investors an extra five years at the higher rate. But when it comes, the change will have an impact on pension schemes and other investors who hold index-linked gilts. “While the average difference between RPI and CPIH might look small at 0.8 percentage points, over time that could lead to a retirement income worth thousands of pounds less,” says Tom Selby, senior analyst at investment firm AJ Bell.

However, for students, whose loan interest is linked to RPI, and commuters whose rail fares rise in line with it each year, switching to a measure that is typically lower will be good news. They may have hoped for a 2025 change.

From our colleague Heather Stewart

25 Nov 202012.05 EST

NHS in England gets extra £3bn to tackle operations backlog

Denis Campbell

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.

“Our world-class NHS has played a critical role in the response to Coronavirus but we know how desperately difficult and distressing it has been for patients that are waiting to have operations and medical treatment during the pandemic”, said Rishi Sunakin his statement.

The £3bn is much less than the £10bn a year more that the British Medical Association and Health Foundation thinktank has said the service needed to cope with the rising demand for care.

The £1bn will fund the NHS to carry out up to one million more checks, scans and operations on people who could not get treatment in the spring when many non-Covid services were suspended.

Around £500m of the £3bn will go into expanding mental health care for people who could not access help when the pandemic struck. That money will be used to tackle both the backlog of adults referred for mental health care and to create new specialist services for under-18s. It should also help ensure faster access to “talking therapy” for people with anxiety and depression.

The £3bn will boost the depatment of health and social care’s budget by £6.6bn and mean that the NHS’s revenue budget in England in 2021/22 will be £136.1bn.

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.

25 Nov 202011.57 EST

Josh Halliday

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.

Burnham said that although infection numbers in Greater Manchester were still high, cases rates had fallen from 556 cases per 100,000 people four weeks ago to 291 cases last week. However, this and other key metrics – including the infection rate in the over 60s – remain higher than the national position. He said:

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.

Ministers have previously said they do not expect to make significant changes to the tier arrangements when they are first reviewed in mid-December.

Burnham said he did not agree with the tier 3 measures which had been put forward by the government, which he said would be “too punishing on hospitality and will be too hard on city centres, particularly as we go through Christmas and the New Year period.”

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.

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.

But he makes a wider point too - it’s not just public health restrictions that matter for the economic impact of coronavirus. It’s also the number of cases, rates of transmission and infection rates.

So while public health restrictions force parts of the economy to close, rising infections also hurt the economy by dampening people’s willingness to go out to restaurants, pubs or the shops.

Hughes adds that we saw this in recent months -- consumption and economic activity started to fall even before new tiered restrictions were introduced, as infections picked up again. That’s why public health interventions, such as test and trace, as so important.

OBR board member Charlie Bean added that the government has recognised that it made sense to allow people more time to finish up their drinks by redesigning the tiering restrictions (last orders at 10pm but closure extended until 11pm, for pubs and restaurants in lower tiers).

Bean says:

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.