There is a view that we don’t have to worry about the record debt the government has accumulated since coronavirus laid waste to our way of life and our economy. And in two senses I would half agree – though the other half of me is wracked with anxiety.
First, this is not a uniquely British problem; it is a problem of all developed economies.
However, you should not underestimate the geopolitical significance of the explosion of debt in the rich West, because it represents by implication the fastest transfer of wealth and power to China and Asia in our lifetimes.
Second, there is the important counterfactual – namely what would have happened if the government had not borrowed and spent all that cash. Which does not bear thinking about.
All that said, it will be a huge moment on Wednesday when the Office for Budget Responsibility confirms that the UK is on course to borrow around £400 billion this year, equivalent to around 20 per cent of national income, and that the national debt will rise to well over 100 per cent of that same national income. Outside of world wars, this is a uniquely large and fast rise in public sector debt.
The supposed catastrophe of the banking crisis caused a deficit that was seen as an existential threat by the then-governor of the Bank of England – though it was half the size of the current deficit. But, you will doubtless say, interest rates are so low it really doesn’t matter if the government is borrowing on this scale: the money is effectively free. The PM and Chancellor would be fools, surely, to look this gift horse in the mouth and they should continue the spending splurge for as many years as it takes to level up, re-wild, re-tool, re-skill and do all that’s necessary to make the UK green and pleasant again.
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