RISHI Sunak has cut the UK’s international aid budget saying it was difficult to justify the commitment during “a time of unprecedented crisis".

The Chancellor told MPs that the Government would “continue to protect the world's poorest” by “spending the equivalent of 0.5% of our national income on overseas aid in 2021”.

This, he said, would be more than most other countries. He also promised that the slashed budget would be restored “when the fiscal situation allows”.

News of the cut came in the Chancellor’s spending review, which set out public spending for the next year. 

READ MORE: Spending review: Alison Thewliss blasts Rishi Sunak for festival of Brexit

Sunak told the Commons: “Our health emergency is not yet over, and our economic emergency has only just begun.

“So our immediate priority is to protect people’s lives and livelihoods.”

The Chancellor revealed that the Office for Budget Responsibility had forecast that the economy will “contract this year by 11.3%, the largest fall in output for more than 300 years”.

Even with growth returning in the years following, Sunak said the economic output would not be expected to return to pre-crisis levels "until the fourth quarter of 2022".

The economic damage would, he added, be long-lasting.

"Long-term scarring means, in 2025, the economy will be around 3% smaller than expected in the March Budget,” he said.

Sunak also warned that unemployment is predicted to rise to a peak of 7.5% – or 2.6 million people – in the second quarter of 2021.

The Chancellor also announced a public sector pay freeze, saying he could not "justify a significant, across-the-board” pay increase.

This will directly impact thousands of UK Government civil servants in Scotland.

Sunak told MPs: “Taking account of the pay review bodies’ advice, we will provide a pay rise to over a million nurses, doctors and others working in the NHS.

“Second, to protect jobs, pay rises in the rest of the public sector will be paused next year. But third, we will protect those on lower incomes. The 2.1 million public sector workers who earn below the median wage of £24,000, will be guaranteed a pay rise of at least £250.”

The Chancellor said the “majority” of public sector workers will see their pay increase next year.

The UK's budget deficit this year is set to reach £394bn or 19% of GDP – the highest level in peacetime.

Borrowing will remain at £164bn next year and remains at about £100bn for the remainder of the forecast.

In July, the OBR estimated a budget deficit – the gap between spending and tax income – of £322bn for 2020-21.

The OBR had previously estimated the national debt – the sum total of every budget deficit – of £2.2tn in 2020-21, or 104.1% of GDP.

Sunak also announced plans for greater investment in infrastructure, totalling around £100bn next year.

He unveield plans for a new infrastructure bank, to be headquartered in the north of England.

There's also to be a new £4bn “levelling up” fund, to which any local area can bid for the funding of local projects.

In total there was an extra £55bn in spending announced. For England, that includes an extra £3bn for the NHS, £2bn for keeping transport running, £3bn to local councils, and extra £250m to end rough sleeping.

Sunak said Scotland's block grant for 2021-22 will be £2.4bn above last year's allocation, of that, £1.3bn is to tackle Covid specifically.

There were also plans accelerate the Tay Cities, Borderlands, Moray and Scottish Islands City and Growth Deals.

Scottish Tory leader Douglas Ross welcomed the Spending Review: “It’s now a fact that Rishi Sunak and the UK Government have gone further than any government in peacetime history to protect jobs and support public services.

“These unparalleled spending promises show that the deep pockets of the UK Government are best placed to support Scottish jobs, schools and hospitals.

“The Scottish Conservatives argued for accelerated City and Growth deals to invest more quickly in Scottish communities, and we’re delighted to see that has been delivered alongside a bumper £2.4 billion boost in Barnett Consequentials.

The SNP Shadow Chancellor Alison Thewliss warned that the Tory government was falling short of the amount of support needed to "secure a fair and full recovery from the pandemic."

She said:"Yet again, Scotland has been completely ignored by Westminster. This failure will make the growing Tory unemployment crisis even worse, squeeze living standards even further, and risk a protracted downturn by starving the economy of funds. It shows, yet again, that Westminster cannot be trusted to act in Scotland's interests.

"By blocking the devolution of financial powers and withholding investment, the Tories are hindering Scotland's ability to respond to this crisis. Scotland can secure a strong, fair and green recovery but we can only do it with the full powers and investment required. It is clearer than ever that the only way to properly protect Scotland's interests is to become an independent country.”