With firms shuttered and households couped up, economic activity stalled and tax revenues nosedived. Government spending skyrocketed, to an astonishing 57pc of GDP, paying for furlough and soft business support loans. As borrowing cranked up, gilt issuance ballooned to a colossal £486bn, but remained up at £195bn the following year, as the economy struggled to recover after lockdown ended in mid-2021.
But more than three years on from lockdown, far from returning to “normality”, government borrowing is again sky-high and on a sharp upward trajectory. New gilts issuance hit £179bn in 2022, an estimated £239bn last year and, on current forecasts, £278bn in 2024/25.
There’s no lockdown, we haven’t since endured a financial crisis, yet Britain is still borrowing sums unprecedented outside of wartime and Covid. And with Labour having immediately caved in to public sector union pay demands, gilt sales are spiralling upward anew.
Successive years of massive annual gilt sales mean the stock of accumulated national debt, just 30pc of GDP ahead of the global financial crisis, surging to 80pc pre-pandemic, now sits around 100pc of GDP – our public sector debt pile now equal to the UK’s entire annual economic activity.
Even before borrowing increases even more from Wednesday, the Government is already spending £89bn a year on interest payments to service that debt – “dead money” that amounts to more than the entire schools’ budget.
Then there are other vast “off-balance-sheet” liabilities which the state must meet, albeit over a number of years – such as the £151bn outstanding on deals under the fiscally disastrous private finance initiative. And let’s not forget – because politicians always do – the £100bn-and-counting the state owes on hugely generous public sector pensions – for civil servants and other public sector workers.