GOVERNMENT debt has grown so much in recent months it’s now bigger than the entire economy — 104 per cent of national income — for the first time since World War Two.

Our national debt just topped £2trillion, over £30,000 for every man, woman and child. 

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So should we start paying it back?

Here two economics experts argue for and against. 

YES

By Liam Halligan, economics expert

THE UK is living on tick.

Tackling Covid means spending vast sums on business support measures, as our locked-down economy struggles to generate tax.

To plug the hole, the Government borrowed £246billion between April and September, three times more than any six-month period in British history. 

Relying on the Bank of England to create money and buy government debt is an extremely dangerous habit.

The financial crisis of 2008 led to the emergence of “Alice in Wonderland” economics, with central bank money creation juicing up stock markets and helping governments sell their debts.

Responding to Covid, we’ve dived ever deeper down the economic rabbit hole — with the UK and others borrowing like crazy to fund extreme lockdown strategies. 

Rishi Sunak’s original furloughing scheme ends this week.

But new multi-tiered regional lockdowns mean the Chancellor will pour continued vast sums into a similarly expensive replacement scheme.

Fresh lockdown will crush what economic recovery we’ve seen, putting our public finances under even more pressure.

But we can’t pretend ever-rising government debt, backed by money-printing, is a credible strategy.

History shows a bit of inflation can become a lot, taking us back to the bad old days of the 1970s.

And what if outlandish policies cause a sterling crisis, with interest rates spiking, as stock and bond markets implode?

History also shows, in the fall-out from financial collapse, the poor suffer most.

NO

By Carl Emmerson, Fiscal Studies Institute

GETTING debt back down to pre-virus levels will be the task of decades — a burden future generations will have to bear.

As the Chancellor continues to set out ever more expensive packages, he needs to consider the impact on taxpayers for years to come.

But he should still go ahead and borrow. Spending more will add to the debt but should also help deliver a fuller economic recovery and ensure we, and future generations, will be richer than would have been the case.

There will be more money available to pay back the debt.

Good investments in healthcare and in public health, such as a decent test-and-trace system, will not only save lives today but will also limit the economic damage done by the virus.

Supporting jobs and businesses should help ensure more survive than go to the wall. This will help stem the inevitable rise in unemployment.

Limiting the jobless rise will reduce the damage to living standards now and for years to come.

The crucial thing is to make sure the money is spent well.

If billions are thrown away on a test-and-trace system which doesn’t deliver, or on supporting jobs and businesses that will be lost anyway, they are wasted.

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Thankfully, the Government can borrow at the lowest interest rates in our history.

Once we are through the crisis, tax rises will be needed.

For now, the Government must make sure it spends every pound well. Economic recovery comes first.

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