The Chancellor will unveil a £100 billion plan for long-term infrastructure investment on Wednesday, including a £3 billion package to help the NHS recover from the pandemic.
The Treasury said £1 billion of the NHS package will go towards catching up on checks, scans and operations that were delayed by Covid-19.
Around £1.5 billion will be used to ease existing pressures in the health service, and £500 million will help support mental health services.
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In an interview ahead of his spending review, Mr Sunak warned the ‘economic shock’ the nation is experiencing must be paid for somehow.
He told the Sunday Times: ‘People will see the scale of the economic shock laid bare. We can see the data every month, and obviously the shock that our economy is facing at the moment is significant.’
He hinted that a combination of spending cuts and tax rises will eventually follow, but said it is a ‘question of timing’ while the economy is in difficulty.
‘While that’s happening, absolutely the right thing to do is to support the economy, and jobs are my number one priority, but – obviously – you can’t sustain borrowing on this level indefinitely,’ he said.
‘Once we get through that, we’ll have to figure out what the best way of returning to sustainable public finances is. I’m hopeful that by the spring, with positive news on both mass testing and vaccines, we can start to look forward.’
The Chancellor has faced criticism from unions and the Labour Party over reports that he will announce a pay cap on millions of public sector workers as part of the spending review, although NHS doctors and nurses are expected to be exempt.
Labour shadow chancellor Anneliese Dodds said Mr Sunak must use his review to prevent a return to the conditions that allowed the UK to be ‘so badly hit by the pandemic’.
She said the Chancellor ‘must lay the foundations for that recovery’ to prevent protective equipment stocks running low, local services returning to being ‘on their knees’, and families being left ‘struggling with the cost of living’.
Mr Sunak will also unveil the much-delayed National Infrastructure Strategy on Wednesday, which includes long-term investments in the climate and transport sectors, as well as plans to narrow the north-south divide.
The strategy, which was due to be published in March, will provide £100 billion to improve transport system connectivity and work toward the government’s net-zero emissions target by 2050.
The Chancellor will also make changes to the Treasury’s ‘green book’, a set of rules to determine the value of Government schemes which is thought to favour London and the South East of England.
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