It’s already a lively one. A rising number of vocal economists are calling the Chancellor to use the UK’s record low borrowing costs to raise funds in the market to boost infrastructure spending and stimulate growth.
The Chancellor, meanwhile, remains 100pc committed to his plan – that the Government will not jeopardise its market credibility by getting out the chequebook for a debt-fuelled spending binge.
As the argument rages, though, the official data is making a mockery of both groups.
Borrowing this year could be as much as £30bn more than in 2011/12, according to economists at Royal Bank of Scotland and Scotiabank. That would take it to £155bn – just £3bn less than Labour at the height of its Keynesian stimulus efforts in 2009/10.
The figure was unsustainable then and it is now.
So borrowing is already soaring, just as the Chancellor’s critics would like and despite George Osborne’s best efforts.
If the deficit does mushroom as feared, the markets could start asking fresh questions about the sustainability of Britain’s public finances. Osborne might even have to make more pledges on cuts in future years.
On the other hand, the growing chorus of voices will argue that – with the deficit already so high – borrowing another £20bn-£30bn for one-off projects would be neither here nor there.
Stimulating growth could reduce unemployment and trigger a recovery that would see tax receipts pickup, pushing the deficit down rapidly after the one-off spending round, they will say.
Both options carry huge risks. If the Chancellor is too inflexible, the markets may decide the lack of growth is Britain’s Achilles’ heel. If he caves in and spends for little reward, the markets could decide he is another fickle politician and demand growth-sapping, higher borrowing costs.
Another plan might be to provide some kind of debt relief to the private sector in the hope that households can stimulate demand. If that coincided with a sharp fall in inflation, that might help. But no such plans are under consideration, despite suggestions by the International Monetary Fund among others.
Short of a resurgence in Europe – which is simply not going to happen – or a radical new idea, the public finance figures serve as a reminder that the financial crisis and decade of debt have condemned the UK to just this uncomfortable state of anxiety.
- Borrowing figures make a laughing stock of the Chancellor – and his opponents (blogs.telegraph.co.uk)
- Borrowing figures add up to a political headache for the government (guardian.co.uk)
- Deficit reduction blow as figures reveal Government borrowed £3 billion more than expected last month (independent.co.uk)