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In defence of austerity

Free money is in vogue—but there’s no such thing, says the former head of the Treasury

By Nicholas Macpherson   March 2021

Thirty years at the Treasury has made Macpherson suspicious of new orthodoxies. Photo: Kirsty O'Connor/PA Archive

This year the British state is set to borrow almost £400bn. That’s a peacetime record. The national debt—a mere 27 per cent of national income in 2001—is set to rise to almost 110 per cent by 2023. Yet the markets haven’t batted an eyelid. The government can issue 10-year debt at an interest rate of 0.3 per cent, and sterling is stable.

A cosy consensus has emerged across left and right that borrowing does not matter. Look at Japan, the argument goes: its debt levels are double the UK’s and the sky hasn’t fallen in. Look at the…

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