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Politics Explained

Can Britain afford to borrow its way out of the coronavirus crisis?

If the economy stagnates, there will be pressure to raise taxes and limit public spending, writes Sean O'Grady

Sunday 17 May 2020 16:31 BST
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Rishi Sunak has been praised for his measures to soften the impact of the pandemic
Rishi Sunak has been praised for his measures to soften the impact of the pandemic

Who will pay for the coronavirus crisis? Who, in other words, is going to pay back the large-scale debt being run up by the government on behalf of the British state? Can it even be paid back?

First, we need to take a quick look at the scale and context. What we have here is, in fact, a national version of the business that is seeing its revenues slashed and is having to borrow to keep itself alive for the best part of a year or so. There’s nothing that fundamentally wrong with it, and as soon as custom picks up things will get back to normal – except with that hangover of extra indebtedness, and the cost of carrying it and in due course repaying it.

It’s the same for the UK. The sharpest recession in 300 years will – or should – be followed by the sharpest recovery, because the fundamentals should be basically unchanged (though the longer the crisis persists, the less true that may be as investment falls, skills atrophy and industries have to adapt to the “new normal”).

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