In the midst of the COVID-19 crisis, public finances are the focus of intense public attention. The OBR, as well as a leaked Treasury document, suggest that public borrowing in 2020-21 could rise to more than £300 billion. But what does this all mean? Is the UK doomed by high debt? This briefing puts such numbers into perspective. It shows that high borrowing – necessary to fight the crisis – and an increased debt level are manageable in the medium term. This judgement is based on an interactive online tool that allows users to experiment with different assumptions to observe how forecasts of the public finances change in real-time.
The COVID-19 crisis will affect the public finances through higher unemployment, reduced tax revenue and substantial government spending on schemes to support the economy. Already there are calls for a return to austerity once the most acute phase of the medical emergency has passed. It can be difficult for citizens to take a position on these debates: many feel that they lack the technical knowledge.
Forecasts of public debt and deficits play an important role in framing these debates. Media headlines give the impression that higher public debt presents an immediate danger to the financial security of the average citizen. This limits the ability of voters to question their government’s policies on the basis of an informed position on the likely costs and benefits of alternative strategies.