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National living wage hourly increase to £8.91 - and other highlights of the spending review

Peterborough workers will be among those to see an increase in the national living wage of 19p an hour, following the government spending review.
Rishi Sunak (Picture: PA Media)


The wage is currently £8.72 per hour, which will increase by 2.2% to £8.91 an hour in April next year, with this rate extended to those aged 23 and over.

However Chancellor Rishi Sunak scrapped a planned 5.6% rise which would have set the wage at £9.21, amid fears that it could damage or destroy already vulnerable businesses dealing with the Covid pandemic.

During his review on Wednesday he said of the rise: "Taken together, these minimum wage increases will likely benefit around two million people."

On departmental spending, the Chancellor said it will total £540 billion next year before noting: "Over this year and next, day-to-day departmental spending will rise, in real terms, by 3.8% – the fastest growth rate in 15 years."

Mr Sunak highlighted a disparity between public sector and private sector wages, adding he "cannot justify a significant, across-the-board" pay increase for all public sector workers in the circumstances.

He told MPs: "Taking account of the pay review bodies’ advice, we will provide a pay rise to over a million nurses, doctors and others working in the NHS.

"Second, to protect jobs, pay rises in the rest of the public sector will be paused next year. But third, we will protect those on lower incomes. 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."

The Chancellor said the "majority" of public sector workers will see their pay increase next year.

Mr Sunak said nearly £3 billion would be provided to Work and Pensions Secretary Therese Coffey to deliver a new three-year “restart programme” to help more than one million people who have been unemployed for more than 12 months to find new work.

He added unemployment is predicted to rise to a peak of 7.5% – or 2.6 million people – in the second quarter of 2021.

The Chancellor also said: "Unemployment is then forecast to fall in every year, reaching 4.4% by the end of 2024."

Key points from the spending review

– Mr Sunak said the Government was providing £280 billion this year to get the country through the coronavirus crisis.

– The Office for Budget Responsibility (OBR) is forecasting the economy will contract this year by 11.3% – the largest fall in output for more than 300 years.

– The OBR expects the economy to start recovering once Covid restrictions are lifted, growing by 5.5% next year, 6.6% in 2022, then 2.3%, 1.7% and 1.8% in the following years.

– The pandemic is likely to have caused “long-term scarring”, meaning in 2025, the economy will be around 3% smaller than expected in the March Budget.

– The UK is forecast to borrow a total of £394 billion this year, equivalent to 19% of GDP – the highest recorded level of borrowing in peacetime history, according to Mr Sunak.

– Underlying debt is forecast to be 91.9% of GDP this year and is predicted to continue rising, reaching 97.5% of GDP in 2025/26.

– The OBR expects unemployment to peak at 7.5% 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.

– The National Living Wage will increase by 2.2% to £8.91 an hour.

– Total Government department spending next year will be £540 billion, with day-to-day departmental spending rising, in real terms, by 3.8%.

– The overseas aid budget will be cut to 0.5% of gross national income in 2021 but Mr Sunak said the Government’s “intention” was to return to 0.7% when the fiscal situation allows.

– A new UK infrastructure bank – headquartered in the north of England – to finance major new projects is set to be established.

– A £4 billion “levelling up” fund to finance local infrastructure improvement projects will also be created, Mr Sunak said.

– The Chancellor said that through the Barnett formula, Scottish Government funding will increase by £2.4 billion and Welsh Government funding by £1.3 billion, with £0.9 billion for the Northern Ireland Executive.