No-deal would hammer economy, warns OBR as minister quits over foreign aid cut

Rishi Sunak has announced that the "economic emergency" caused by the pandemic has only just started, while a no-deal Brexit would make the blow even worse, according to the Office for Budget Responsibility (OBR).

The official forecaster warned that unemployment levels could reach 8 per cent, rather than the 7.5 per cent it currently predicts, if the UK does not reach a free trade deal with the EU.

The OBR also said that 2 per cent could be knocked off GDP growth without an agreement.

Among the major announcements in Wednesday’s spending review, Mr Sunak said that some public-sector workers would have their salaries frozen next year and that the overseas aid budget would be cut to 0.5 per cent of national income, a decision that was met with protest from the opposition benches.

The cut to the foreign aid budget led to the resignation of Baroness Suggs, a Foreign Office minister.

“I believe it is fundamentally wrong to abandon our commitment to spend 0.7% of gross national income on development. This promise should be kept in the tough times as well as the good,” she wrote in her resignation letter to the prime minister.

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