Like the 2008 global financial crisis before it, in the wake of the Covid-19 pandemic an all too predictable phenomena has emerged. Whenever new public finance statistics come out, what follows is: public debt fearmongering, false household analogies, and a flurry of commentary devoid of any semblance of literate macroeconomic analysis. Of course, understanding public sector finances is important, but headline statistics alone don’t tell us that much. And, in the rush to fetishise public debt, the real story of the macroeconomy and the fundamental role of government borrowing within it, gets missed.
The fact that public borrowing has not been this high since the second world war is serious and should not be taken lightly. But equally, the fact that financing that debt has never been more affordable is also hugely reassuring. Yet despite having countless headlines on the former throughout the pandemic, there has been precious little attention given to the fact that the government’s debt servicing costs are at historic lows. This isn’t just the fault of journalists either. The Office for National Statistics does not even lift this indicator up into its summary of the “main points” of its public finance statistical release – something that should be immediately rectified.
It’s hard to overstate the point about the actual cost of debt. Government borrowing has increased by nearly £300bn over the recent financial calendar year. Yet
— source neweconomics.org | Frank van Lerven | 26 May 2021