RUTH SUNDERLAND: £2trillion of debt – here’s one horrific bill Dishy Rishi CAN’T just wave away

For anyone still indulging in the fantasy that life can be one long furlough, the speed with which our national debt has surged above £2trillion should come as a wake-up call.

The Chancellor saved us from economic armageddon by creating a huge safety net for families and businesses.

But now Dishy Rishi, with his panopoly of schemes – from cheap loans for firms to ‘Eat Out to Help Out’ – has had a glimpse of the bill, and it’s one that has you reaching for your calculator in horrified disbelief.

Fortunately, Mr Sunak’s predecessors in No 11 had, prior to the pandemic, put in years of hard work to bring down borrowing after the financial crisis of 2008.

Thank goodness they did. Had we not gone into the emergency with our public finances in decent shape, we would now be in a far, far worse plight. 

A debt of £2trillion is a breathtaking sum and one that gives rise to the question: how will we ever pay it back? In the immediate future, thankfully, we don’t have to.

In the short term we do not face a debt crunch because interest rates are at rock bottom and Britain has a good credit rating.

Nations are different from individuals in the sense that no one actually expects governments to pay back their entire debts. For reasons I won’t detain readers with here, it wouldn’t even be desirable in the unlikely event they ever did.

What really matters is the debt is kept at a manageable level – and this is why the alarms are clanging.

Interest rates are low now, but they will not remain so forever. When they do rise, a huge debt would become a major drag on growth.

In a worst-case scenario, uncontrolled spending and borrowing can morph into a sovereign debt crisis. We have seen in Greece and Argentina how that brings impoverishment for millions of families and political instability. We are a long way from that but cannot afford to be complacent.

There is no mystery why our debt has mushroomed. The Chancellor has been spending billions on coronavirus relief schemes at the same time as his tax revenues have plunged.

You don’t need a PhD in economics to see where this is going if it carries on much longer. Mr Sunak has signalled he will not countenance a runaway national debt and good for him. 

Therefore, he must get spending and tax revenues back in kilter. He also needs to boost the economy, so that the debt is proportionally less of a problem. He should resist the siren calls for furlough and other costly schemes to be extended: it will only prolong the agony.

As for tax rises, they should be a last resort – indeed, tax cuts, free ports and measures to stimulate business would be a much better bet.

Fortunately, the economy is bouncing back. As Andy Haldane, the chief economist at the Bank of England, pointed out in this newspaper, it has already regained half its losses. Retail sales in July have returned to pre-virus levels, there has been a modest improvement in manufacturing and the housing market has picked up.

Some have enjoyed a lockdown summer, but if we are to avoid a grim future of debt and despair, we all must strain every sinew to get the country back to work.