Sanctions on Russia ‘not cost-free’ for UK, warns Chancellor

Rishi Sunak said the sanctions imposed on Russia were ‘of unprecedented scale and scope’.

The Chancellor said measures taken against the Russian president and his regime presented a ‘risk’ to the UK recovery (Dominic Lipinski/PA) (PA Archive)

Standing up to Russia and providing support for Ukraine will not be “cost-free” for the UK economy, Rishi Sunak has warned.

The Chancellor pitched his spring statement on Wednesday on the issue of security, as he said a strong economy at home meant being able to fight threats – such as Vladimir Putin – abroad.

Mr Sunak told the Commons the sanctions imposed on Russia were “of unprecedented scale and scope” and that the UK had a “moral responsibility” to help Ukraine.

But he said measures taken against the Russian president and his regime were “not cost-free for us at home” and presented a “risk” to the recovery.

Mr Sunak told MPs: “The sorrow we feel for (Ukraine’s) suffering, and admiration for their bravery, is only matched by the gratitude we feel for the security in which we live. And what underpins that security is the strength of our economy.”

He said: “We should be in no doubt, behind Putin’s invasion is a dangerous calculation: that democracies are divided, politically weak and economically insecure – incapable of making tough long-term decisions to strengthen our economies.

“This calculation is mistaken.”

But he said it was too early to yet know the impact the invasion – and subsequent western support – would have on the economy.

He said the Office for Budget Responsibility (OBR) had recognised there was an “unusually high uncertainty around the outlook”.

The OBR said on Wednesday that the invasion was “foremost a human tragedy and a reminder of the terrible costs of wars and theimmense and immeasurable losses for those caught up in them”.

But it added: “The conflict also has major repercussions for the global economy, whose recovery from the worst of the pandemic was already being buffeted by Omicron, supply bottlenecks and rising inflation.”

The OBR said by a fortnight into the invasion, oil and gas prices peaked over 200% and 50% above their end-of-2021 levels respectively.

“Prices have since fallen back but remain well above historical averages,” it said.

Shadow chancellor Rachel Reeves attacked Mr Sunak for not raising the Ministry of Defence’s budget in light of the invasion of Ukraine.

Ms Reeves said: “The situation following Putin’s criminal assault on Ukraine remains gravely serious, just one month after the invasion so much has changed with repercussions for years to come.

“But the Chancellor has failed today to explain why he chose to sign off on a reduction in our country’s armed forces last October.”

Dr Alan Mendoza, executive director of the Henry Jackson Society think tank, said: “The Chancellor’s failure to raise defence spending will regrettably be welcomed in the Kremlin. The Government must urgently invest in our armed forces.”

He said: “The invasion of Ukraine has proved that our enemies increasingly threaten us and our security. This spring statement ought to have been the moment to increase defence spending and reverse dangerous cuts to our armed forces.”

Meanwhile, in his statement to the Commons, Mr Sunak said £400 million was being sent to Ukraine “in economic and humanitarian aid”.

But charity World Vision called for the aid budget to be increased.

Chief executive Mark Shear said: “Without increasing the aid budget to meet these needs, funds will be redirected away from other programmes which are vital to save lives.”

Simon Starling, director of policy, advocacy and research at international development network Bond, added: “It would be ill-judged and morally wrong if our support came at the expense of other marginalised communities affected by extreme poverty, conflict and inequality.

“The money we give to Ukraine – and all future crises – should be additional to the already reduced UK aid budget, not taken from it, until the Government meets its 0.7% commitment.”