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© Spencer Wilson

Does government debt matter any more?

Running up debt used to prefigure political ruin, but in the 2020s nothing seems to stop governments living in the red

Margaret Thatcher did not approve of big budget deficits. “The problem with socialism,” she once said, “is that you eventually run out of other people’s money.” In 1981, in the teeth of a deep and painful recession, her chancellor Geoffrey Howe unveiled an austerity budget, provoking a condemnatory letter from 364 economists.

Safe to say, then, that were she still alive, Thatcher would be horrified that a Conservative government was running a deficit of around £300bn this year and that Britain’s total debt was nearly 100 per cent of GDP. In his March budget, Rishi Sunak did announce (postponed) tax rises, together with a fresh bout of (postponed) austerity for public services, which will supposedly bring the deficit under control in the end. But his plans, even if realised, won’t make much of a dent in the total. The Office for Budget Responsibility forecasts that the headline stock…

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