Rishi Sunak has confirmed that millions of public sector workers will be hit with a cruel pay freeze.
Updating the country on the bleak outlook for the British economy, the Tory Chancellor attempted to play divide and rule with the frontline workers who kept Britain safe through the pandemic.
He confirmed that while nurses, doctors and others in the NHS will get a pay rise, other public sector workers will not - unless their pay is under £24,000.
A grim-faced Mr Sunak told the Commons: "Our health emergency is not over and our economic emergency has only just begun."
He also slashed Britain's support to the world's most desperate - cutting foreign aid as the virus continues to destabilise the globe.
Mr Sunak said that the OBR had predicted that the economy will contract by 11.3% this year - "the largest fall in output for 300 years".
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And they warned it would be the "4th quarter of 2022" until the economy recovers to pre-virus levels.
Unemployment is expected to peak next year at 7.7% - or 2.6million people.
He warned of long-term scarring that would follow with predictions showing that "in 2025 the economy will be around 3% smaller than expected in the March budget".
He confirmed the Government would set aside £55billion for the next year to combat coronavirus.
And the Chancellor realised the worst fears of almost 4million workers by confirming their pay will be frozen.
Labour's Anneliese Dodds said the move took a "sledgehammer to economic confidence".
Nurses, doctors and others in the NHS, will get a pay rise.
Pay rises in the rest of the public sector will be paused next year.
The plan includes teachers, Armed Forces, police, Whitehall civil servants, council and government agency staff.
But Mr Sunak insisted that the lowest paid public - those earning below £24,000 would see their pay increased by at least £250.
The UK has 5.5million public sector workers, of which just under 1.8million work in the NHS.
Public sector workers bore the brunt of austerity cuts after the global financial crash, and unions have warned this is heaping punishment on those who worked to keep the country going during the pandemic.
Mr Sunak was not hesitant to turn on the cash elsewhere - with departmental funding set to increase.
He also unveiled a £4billion infrastructure fund to meet the Government's commitment to "level up" the country.
He said: "Next year, total departmental spending will be 540 billion pounds.
"Over this year and next, day-to-day departmental spending will rise, in real terms, by 3.8% - the fastest growth rate in 15 years.
"In cash terms, day-to-day departmental budgets will increase next year by 14.8 billion pounds."
A new "UK infrastructure bank" - headquartered in the north of England - to finance major new projects will also be established, Mr Sunak said.
He added said the schools budgets will increase next year by £2.2 billion.
On moves to break a legal commitment to spend 0.7% of GDP on international aid.
He told MPs: "During a domestic fiscal emergency, when we need to prioritise our limited resources on jobs and public services, sticking rigidly to spending 0.7% of our national income on overseas aid is difficult to justify to the British people - especially when we're seeing the highest peacetime levels of borrowing on record.
"I have listened with great respect to those who have argued passionately to retain this target. But at a time of unprecedented crisis, government must make tough choices."
He said 0.5% of national income will be spent on overseas aid in 2021 - the equivalent of £10 billion in the Spending Review - before noting: "Our intention is to return to 0.7% when the fiscal situation allows."
The Chancellor confirmed he would open a three-year Restart programme, worth £2.9 billion, which the Treasury has claimed will help more than a million unemployed people get back into work in the wake of the pandemic.
There will also be £1.4 billion to increase the capacity of Jobcentre Plus and a £375 million skills package.
The OBR has previously estimated the Government will borrow £372.2 billion in 2020-21 but the latest figures will be revealed alongside the Chancellor’s statement on Wednesday afternoon.
Earlier on Wednesday, Ministers were told that Mr Sunak’s three priorities for the Spending Review, which will set departmental budgets for 2021/22, are protecting lives and livelihoods during the pandemic, investing in public services, and funding infrastructure to help “level up and spread opportunity” across the UK.
A No 10 spokesman said Mr Sunak and Treasury Chief Secretary Stephen Barclay updated the Cabinet ahead of the Spending Review.
“Cabinet was told the OBR forecasts will show the impact the coronavirus pandemic has had on our economy and they will make for a sobering read, showing the extent to which the economy has contracted and the scale of borrowing and debt levels,” the spokesman said.
“But – as the IMF (International Monetary Fund), OBR and others have pointed out – the costs would have been much higher had we not acted in the way we have done.”
Mr Johnson told the Cabinet the Government would “work tirelessly on job creation, driving economic recovery and building back better”, the spokesman added.
In his Commons statement, the Chancellor will announce the launch of a three-year Restart programme, worth £2.9 billion, which will help more than a million unemployed people get back into work in the wake of the pandemic.
The scale of the challenge was underlined by official figures last week which showed that public sector debt had passed the £2 trillion mark for the first time in UK history – taking it over 100% on national income.