The Chancellor has delivered his Spending Review - setting out government plans for the economy and spending
Rishi Sunak said the government is set to borrow a record £394bn this year
He told MPs unemployment will rise to 2.6 million by the second quarter of 2021
Mr Sunak said the economy is predicted to contract by 11.3% and grow by 5.5% next year and 6.6% in 2022.
Public sector pay will be frozen, except for NHS staff and those earning under £24,000
The BBC has been told that 1.3 million people will be directly affected by the public sector pay freeze
Spending on overseas aid will be cut from 0.7% to 0.5% of national income next year
The spending plans don't include any tax changes - they are only announced in the Budget
The economy has been hit by the cost of borrowing for the coronavirus pandemic and job losses
The Office for Budget Responsibility published its forecasts for the economy and public finances
The OBR warned the economy is not expected to return to pre-pandemic levels until the end of 2022
The chancellor told the cabinet this morning the OBR figures were "sobering"
House of Commons
Parliament
Image source, HoCChancellor giving his statement earlier
Deputy Speaker Nigel Evans has called an end to the proceedings in the Commons.
After over two hours of taking questions from MPs, Chancellor Rishi Sunak has left the Commons chamber.
House of Lords
Parliament
Image source, Getty ImagesA Conservative peer has quit her job as a Foreign Office minister in protest at the government's plans to cut overseas aid spending.
In a letter to the prime minister, Baroness Sugg said the decision to reduce spending from 0.7% to 0.5% of GDP is "fundamentally wrong".
"This promise should be kept in tough times as well as the good," she writes, adding the commitment was in the UK's "national interest".
"Cutting UK aid risks undermining your efforts to promote a global Britain," she adds.
House of Commons
Parliament
Image source, HoCBack in the Commons the chancellor's statement is winding down.
A little earlier Conservative MP Mike Wood called for MPs' salary rises to be paused in line with other public sector workers' pay.
Rishi Sunak agreed adding that Cabinet Office Minister Michael Gove has written to Ipsa (the body which sets MPs' pay) on that point.
The SNP's Drew Hendry said the government's decision to increase Universal Credit during the pandemic is an admission that the benefit is "simply not enough to live on". He asked the chancellor to make the £20 uplift permanent.
Rishi Sunak replied that the temporary measures are under review but insisted the government "will be mindful of how to protect the vulnerable in society".
Image source, Getty ImagesAt a time when unemployment is likely to rise and many will be cautious about big purchases, preferring to save, freezing public sector pay may have consequences for growth, says Luke Bartholomew, UK economist at pension manager Aberdeen Standard Investments.
“The exceptionally good news on vaccine development means that we can now start to look beyond the Covid crisis. It seems clear to us that the main problem facing the economy at that point will be one of insufficient demand and rising unemployment," he said.
"In that context, it is disappointing the chancellor is already looking to prioritise public sector pay restraint. The economy would be much better helped by supporting the spending power of public sector workers. With interest rates exceptionally low, and very likely to stay that way, it is quite simply wildly premature to turn towards deficit reduction measures.”
The Institute for Fiscal Studies has spotted that £10bn has been cut from government departments' planned non-Covid budgets for next year. They will still go up, by £14.8bn, the think tank observes, but the lions share of that increase will go on defence, schools and the NHS.
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Image source, Getty ImagesRichard Hughes of the Office for Budget Responsibility is still answering questions from the media in the press conference.
He says coronavirus has prompted a big expansion in the size of the state.
"Among 35 advanced economies, the UK has seen the second largest rise in government spending as a proportion of GDP," he says.
"To finance this increase in spending we are borrowing twice what we borrowed during the financial crisis."
Reality Check
During his speech earlier, the Chancellor Rishi Sunak referenced some key pledges on public sector recruitment.
Despite the disruption caused by coronavirus, some of these have shown progress over the past year:
When it comes to NHS staffing numbers, we are comparing with the same month in the previous year rather than December 2019 (when the election was held), because there can be seasonal dips in staff numbers. This means the comparisons are more like-for-like.
And on policing, it is important to remember that around 20,000 police officers were cut between 2010 and 2018.
Alison Holt
Social affairs correspondent
Image source, Getty ImagesThe Chancellor has announced that council care services in England, which provide support for older and disabled people, will have access to an extra £1bn in funding – but only a third of that is likely to be new money and those providing services say it is not enough.
There is a new grant of £300m, then councils will be given greater flexibility to raise money through council tax. It is notoriously difficult to estimate how much money will be raised through council tax. It also raises less money in more deprived areas, where council tax levels are lower. These tend to be Northern cities, which will argue that it is a form of funding that does little to help with levelling up.
The immediate reaction from charities supporting older and disabled people is that the money announced falls a long way short of what is needed.
Caroline Abrahams, charity director of Age UK, said: "Against the context of the pandemic, which is both driving up the level of need, and weakening the finances of providers, this is a decidedly reckless approach.”
Image source, Getty ImagesThe CBI, which is Britain's largest business lobby group, broadly welcomed Mr Sunak's plan, saying "the Spending Review lays the foundations for a brighter economic future."
"“But ambition must be matched by action on the ground. The Government’s commitment to build, build, build must be delivered now," it said. "This means a clear strategy to upgrade the UK’s infrastructure" including roads, broadband and clean energy hardware.
Image source, OBRRichard Hughes from the Office for Budget Responsibility (OBR) is giving a press conference.
He says the UK suffered the "sharpest contraction of any major economy other than Spain".
The recovery from the first lockdown was "faster than first predicted" - although not as fast as in other European countries, he says.
He adds that a resurgence of cases at the beginning of Autumn "took the wind out of the recovery".
The Office for Budget Responsibility (OBR) expects the economy to be about 3% smaller in 2025 than if the pandemic never happened and that the government will still be spending £102bn more than it earns by 2026.That means raising a lot of tax to plug the gap.
Too gloomy, says Ruth Gregory, senior UK economist at Capital Economics.
"We think the OBR’s forecasts are underplaying the effect of vaccines on economic activity which would go along way to filling any fiscal hole. Second, 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," she says.
There's a risk that raising taxes too soon will pinch off growth, she adds.
House of Commons
Parliament
Rishi Sunak gets support on the overseas aid cut from Conservative MP Philip Davies.
He says the announcement will be "widely welcomed across the real world, if not in here".
"I don't see why it is controversial to say we should only spend what we can afford," he adds.
Image source, HoCHouse of Commons
Parliament
Image source, HoCThe DUP's Sammy Wilson seeks confirmation that the levelling up fund, the infrastructure bank and the shared prosperity fund will be equally available to the different parts of the UK.
Chancellor Rishi Sunak confirms that they will adding - "these are UK-wide programmes".
He says there will be more details about the infrastructure bank in the Spring.
Image source, OBRThe OBR has published its estimates of the impact a no-deal Brexit could have on the UK economy.
If the UK were to trade on WTO rules, there will be tariffs on goods we buy from the EU where previously there were not. The OBR estimates that this will mean a spike in inflation, since these costs will be passed on to consumers.
The OBR thinks a combination of these tariffs, and what it estimates will be a 5% drop in the value of the pound, will mean consumer prices will be 1.5 percentage points higher than they would have been.
House of Commons
Parliament
Image source, HoCAnother Conservative - this time ex-Foreign Secretary Jeremy Hunt - rises to criticise the cut to overseas aid.
"To cut our aid budget by a third in a year when millions more will fall into extreme poverty will make not just them poorer but us poorer in the eyes of the world," he says.
"There are many ways in which we exert our influence and our values across the world," replies the chancellor. He adds that even with the cut the UK will be more generous than "almost all of our major economy peers".
House of Commons
Parliament
There's an intervention from former Labour leader Jeremy Corbyn, who is sitting as an independent MP after a row over his reaction to a report on anti-Semitism in the party.
He calls for public servants to get a 10% pay rise, to "begin to make up the ground they've lost over the last ten years".
He also says there should be a return to "proper national pay bargaining" for all civil servants, "so those people who deliver for us are seen to be treated properly and fairly".
Image source, HoCHouse of Commons
Parliament
Image source, HoCTory backbencher Andrew Mitchell says he has "very strong support for virtually all of his package today".
But he says the chancellor's "proposed breaking of the 0.7% promise and the 30% further reduction in cash will be the cause of 100,000 preventable deaths, mainly among children".
Mr Micthell adds: "This is a choice I, for one, am not prepared to make and none of us in this House will be able to look our children in the eye and claim we did not know what we were voting for."
Mr Sunak says he "fully respects his passion on the subject".
But he believes the UK can "still make a difference to the worlds poorest countries" with the measures he has introduced.
House of Commons
Parliament
Image source, HoCGreen MP Caroline Lucas calls on the chancellor to introduce a "new economic rule - a net zero test" to assess all government spending against the UK's climate goals.
The chancellor says the government firmly believes in a "green recovery" and urges her to look at the National Infrastructure Strategy.
House of Commons
Parliament
Image source, HoCIn the Commons DUP Westminster leader Sir Jeffrey Donaldson says the £900m in extra spending in Northern Ireland is a "benefit" of the UK.
He calls for the chancellor to "look again" at excluding soldiers and the police from the public-sector pay freeze, alongside NHS staff.
In reply, Rishi Sunak says all public sector workers earning less than £24,000 should get a £250 pay rise.
He says this is the right approach to take to public sector pay.
Image source, OBRThe OBR has also published its estimates on the impact there could be on the UK's economy of leaving the European Union under default World Trade Organisation terms, aka no deal Brexit.
If it has got its sums right, the OBR predicts a no deal Brexit would cut the UK's economic growth by 2% in 2021.
Stand by for their analysis on what it could do to inflation.