Pub sector leaders have been pushing the Government to announce further support for the hospitality sector, which will be hit especially hard by a new set of coronavirus measures.
Addressing MPs, Sunak said the Office for Budget Responsibility (OBR) forecast that the economy will shrink by 11.3% this year, marking the largest contraction for three centuries.
“Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022,” he added. “And the economic damage is likely to be lasting."
2.6m unemployment forecast
Unemployment is expected to peak at 7.5% or 2.6m people mid-next year, according to the OBR.
The Chancellor said the Government would accept a recommendation from the Low Pay Commission and increase the National Living Wage by 2.2% to £8.91 per hour. Sunak said this would benefit some 2m people.
The wage entitlement will also be extended to those aged 23 and over. Workers had to be 25 and older to qualify previously.
The entitlement was expected to rise from £8.72 to £9.21 but this 5.6% increase was scrapped over concerns businesses would struggle.
While NHS doctors and nurses will receive a pay increase, rises in the rest of the public sector will be paused next year.
Pay rise pause
The Chancellor said he could not justify giving everyone in the public sector a pay increase, given the difficulty faced by workers in hospitality in particular.
"In such a difficult context for the private sector, especially for those people working in hospitality, retail and leisure, I cannot justify a significant across the board pay increase across the public sector. Instead we're targeting our resources to where it's needed most," Sunak said.
However, public sector workers earning below £24k will receive a pay rise of at least £250.
Sunak announced £3bn would go to help over a million job-hunters who have been unemployed for more than a year.
The UK will also borrow £394bn, the highest level of borrowing in peacetime.
He said: "Our health emergency is not yet over and our economic emergency has only just begun."
Absent from his speech were any additional measures to aid the pub sector as it braces for a tougher system of rules post-lockdown.
The sector has been urging the Government to extend the business rates holiday and VAT cut for hospitality businesses beyond spring 2021.
The OBR has forecast that there will be a freeze in the business rates multiplier from next April for 2021-22.
However, it said business rates receipts will rise by £12.8bn next year with the end of the rates holiday for hospitality and leisure businesses.
John Webber, head of business rates at Colliers International said the Chancellor had missed an opportunity in the Spending Review to help businesses. "The Chancellor said this Review was all about 'Jobs, Jobs, Jobs', but has forecast that, despite the measures he has revealed, the UK will see 2.6m unemployed by Q2 next year," he said.
He added: "It is incomprehensible how he can say that on one hand, but then ignore the cries of crucial sectors of our economy, particularly the retail and leisure/ hospitality sectors, who need clarity over whether they will facing massive business rates rises again in April next year, once their Covid-19 business rates “holiday” comes to an end.”
Emma McClarkin, chief executive of the British Beer & Pub Association (BBPA) said there had been a "staggering" lack of action to save pubs by the Chancellor.
She said: "It seems pubs have now been cast adrift by the Government. To save businesses and jobs the Chancellor needs to come back to the House this week and set out an enhanced package of support ahead of the new tier system coming into effect.
“Not only is the Government unfairly rendering pubs unviable or forcing many of them to stay closed this Christmas, it isn't even giving them the full financial support they need to survive. Whilst the news of a review of business rates reliefs in the New Year is a glimmer of positive news, it is not nearly enough."
She added: It’s all well and good investing in new jobs, but the actions of this Government are killing viable pub businesses and thousands of jobs that already exist. Yet the Government is not doing enough right now to help them survive nor Britain’s brewers that are reliant on them."
McClarkin wrote to the Chancellor ahead of the review, asking for emergency grants to help pubs make it through the tough winter.
As it stands, pubs can apply for a grant under the Local Restrictions Support Grant if forced to close. However, operators have said this is not enough to cover ongoing fixed costs and make up for lost income.
Pubs with a rateable value over £15,000 and less than £51,000 may be eligible for a cash grant of £1,000 for every fortnight of closure. Those with a rateable value over £51,000 can apply for £1,500 per every 14 days closed.
The BBPA proposed emergency grants based on rateable value. Pubs with a rateable value of less than £15,000 should be eligible for £3,000 a month.