The spectre of austerity has risen again – it’s the least helpful term in UK politics

The latest public borrowing figures are breathtaking: so how will we ever pay it back without bringing back ‘austerity’?

It is the word that Boris Johnson cannot bring himself to utter. He told a Labour MP two weeks ago that “the government has absolutely no intention of returning to the A-word, which I will not quote”.

At the election in December he presented himself as at the head of a new government, nothing to do with those dreadful politicians who had been in power for the previous nine years, imposing austerity on the British people. “That is not going to be our approach,” he said when he returned to parliament after his illness.

Today’s figures for public borrowing have reignited that debate, however. George Osborne, one of those awful people with whom Johnson had nothing to do, was on the Today programme this morning to say “you can call it whatever you like”, but the shrinking of the economy “means hard choices”.

He supported Rishi Sunak’s response to the crisis, borrowing unimaginable sums to pay the wages of millions of workers, but said that over the next two or three years “we have to come to terms with the fact that Britain is poorer than we want to be”, and that taxes will have to rise.

This is likely to be the big political debate between now and the next election, as Johnson tries to avoid Keir Starmer pinning the A-word on him. He and Sunak are hoping to learn from Osborne’s mistakes, when he probably cut public spending too deeply.

In a way, Osborne suggested, it might be easier for them. He said the damage that is being done by the coronavirus shutdown of the economy “is less than the damage that was done in the banking crisis”. A temporary pause in economic activity is not the same as a complete breakdown of the banking system, he said: “The recovery can be quicker and the overall damage can be less.”

What I find surprising, however, is how relaxed all parts of the Conservative Party seem to be about the national debt shooting up to what were previously regarded as unsustainable levels. One of the justifications for the A-word when the coalition government took over in 2010 was the theory that, if the national debt rose to more than 80 per cent of GDP, it would become unsustainable.

It is now heading for 110 per cent and beyond, and yet everyone seems to agree that this is no problem because real interest rates are low or negative, the fundamentals are sound (or will be when the economy has recovered) and the markets have confidence in the government.

If this means we have learned the lessons of the financial crash, then that is welcome news. But just because Osborne may have been wrong when he was chancellor does not mean he is wrong now to warn of hard choices in the future.

The Institute for Fiscal Studies has published an assessment of today’s borrowing figures that suggests it is “likely” that the economy will fail to rebound fully from the crisis, which means there will be a price to be paid over the longer term. It also points out that the demand for higher spending on public services was intense even before the coronavirus outbreak, and that it may be higher still in future, particularly for “NHS and social care, but also preparedness and stockpiling for future pandemics or other disasters”.

That implies that if there is a new “austerity”, it will take a different form from before, of tax rises rather than public spending cuts. Which may make Boris Johnson unpopular, but it will be hard for the Labour Party to argue against them.