THE CORONAVIRUS crisis has caused an 'economic emergency' which will cause 'lasting damage' to the UK, says Chancellor Rishi Sunak.

Setting out his Spending Review in the House of Commons, Mr Sunak said official forecasts showed the UK economy was expected to shrink by 11.3 per cent this year, the worst recession for more than 300 years.

The Chancellor told MPs that the Office for Budget Responsibility (OBR) did not expect the economy to return to its pre-crisis levels until the end of 2022 and the damage was likely to last.

The Government will borrow £394 billion this year.

The OBR also expects unemployment to peak at 7.5 per cent in the second quarter of 2021 – the equivalent of 2.6 million people.

Mr Sunak said: "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."

He added the Government is providing £280 billion to ‘get our country through coronavirus’, telling MPs: "Next year, to fund our programmes on testing, personal protective equipment and vaccines, we are allocating an initial £18 billion."

The Chancellor said £3 billion would be provided to support NHS recovery, while more than £2 billion will be spent on transport.

He added: "And while much of our coronavirus response is UK-wide, the Government is also providing £2.6 billion to support the devolved administrations in Scotland, Wales and Northern Ireland.

"Taken together, next year, public services funding to tackle coronavirus will total £55 billion."

Meanwhile, Mr Sunak said NHS doctors and nurses will receive a pay rise but pay rises in the rest of the public sector will be paused next year.

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 next year, the Chancellor added.

The schools budgets will increase by £2.2 billion, and the Government will also increase the National Living Wage by 2.2 per cent to £8.91 an hour.