The bill’s just come in. The first instalment anyway.

We all knew that the Government would be borrowing billions extra to get us through the Covid crisis, but just how much extra is laid bare in the official figures released this morning.

Public sector net borrowing for the 2020-21 financial year was £303.1 billion — that’s roughly five times what we borrowed the previous year. As the Office for National Statistics points out, government borrowing as proportion of GDP is at its highest level “since the end of World War II”.

Public sector net borrowing was £303.1 billion in the financial year ending March 2021 – £246.1 billion more than the previous year.

This was 14.5% of GDP, the highest proportion since the end of World War II, when it was 15.2% in 1945 to 1946 https://t.co/p64qO7vJ8E pic.twitter.com/pNCqMeQA74

— Office for National Statistics (ONS) (@ONS) April 23, 2021

And yet things aren’t quite as bad as they might seem.

Firstly, while £300 billion (and change) is a lot of money, it’s about £90 billion less than was being predicted at the start of the year.

Secondly, the interest rates we’re paying on our national debt are very low by historical standards. The ONS reports that the interest that HMG paid on its debts last year (£38.8 billion) was nearly £10 billion less than the year before.

Thirdly, don’t forget that the largest share of the public debt issued by the Government is purchased and owned by the Bank of England. This is money that the British state effectively owes to itself. So we’re not about to be foreclosed upon.

Fourthly, whatever our qualms about using funny money printed by a central bank to buy up government debt, let’s give thanks for the fact that the Bank of England is our central bank. That’s not the case in the Eurozone where indebted national governments are beholden to the European Central Bank. Indeed, the more that Eurozone countries have borrowed the more they’ve become dependent on the ECB — not a healthy situation.

Finally, at least the British government’s borrowing money for British government expenditure. If we were still in the EU we’d be borrowing money to fund spending in other EU countries too. This rescue fund is supposed to be a one-off emergency measure — but the German Greens (now in pole position to take control of Europe’s largest economy) want a “common fiscal policy.”

So despite the horrifying national cost of Covid and lockdown, we should be confident about our position coming out of the crisis. We must return to normality in our day-to-day public finances, but also borrow to make long-term investments in leading-edge research, clean infrastructure and advanced manufacturing capacity.

These things have served us well during the crisis — and our future prosperity depends on building upon our strengths.

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Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

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