Will the coronavirus lockdown lead to another round of fiscal austerity? Former chancellor George Osborne has warned that it could. “We’ll be going back into a period of retrenchment and trying to bring public-sector debt down,” he told the CBI recently.
There’s no question that government borrowing will increase sharply; The Office for Budget Responsibility (OBR) forecasts net borrowing this fiscal year of £273bn, which would push the ratio of government debt to gross domestic product (GDP) up to 94.6 per cent, its highest since 1959. Although these numbers are subject to a massive margin of error, nobody doubts the direction the public finances are heading in.
What they do doubt, however, is whether austerity is necessary.