The UK will borrow almost 400 billion pounds ($A726 billion) this year to pay for the massive coronavirus hit to its economy, finance minister Rishi Sunak says, as the budget deficit climbs to its highest level outside wartime.
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The world's sixth-biggest economy is now set to shrink by 11.3 per cent in 2020 - the most since "The Great Frost" of 1709 - before growing by 5.5 per cent in 2021, Sunak said as he announced a one-year spending plan.
"Our health emergency is not yet over. And our economic emergency has only just begun," he told parliament, promising more money for health and to fight unemployment.
The Office for Budget Responsibility (OBR) estimated borrowing would be 394 billion pounds in the 2020/21 financial year that began in April, slightly more than its last prediction in August.
At 19 per cent of gross domestic product, that will be almost double its level after the global financial crisis which took nearly a decade of unpopular spending cuts to work down.
In 2019/20, which ended as Britain began to be hit by the COVID-19 pandemic, borrowing was just 2.5 per cent of GDP.
The UK was hammered harder by the coronavirus pandemic than most other rich economies as it underwent a long lockdown.
Nearly 56,000 people in the UK have died from COVID-19, the highest death toll in Europe.
Since the pandemic struck Britain a few weeks after he took over as finance minister, the former Goldman Sachs analyst has rushed out emergency spending - much of it on pay subsidies to fend off a surge in unemployment - and tax cuts.
To meet Prime Minister Boris Johnson's promise to voters of "levelling up" growth around the country, 100 billion pounds will be spent next year on longer-term investment, 27 billion pounds more than last year.
Paul Johnson, head of the Institute for Fiscal Studies think-tank, said the headline numbers were "completely staggering" but hid a squeeze on spending in three or four years' time which would be challenging to deliver.
Sunak signalled some early cost-saving moves.
He announced a freeze on pay for public sector workers except for doctors, nurses, other health staff and the lowest-paid public workers and a cut to the UK's foreign aid budget.
Britain will cut overseas aid spending to 0.5 per cent of GDP, a level that remains higher than almost all other rich countries, from 0.7 per cent.
The Archbishop of Canterbury Justin Welby said the cut was "shameful and wrong" and urged lawmakers to vote against it.
Australian Associated Press
