The Treasury is reportedly already thinking up ways to reduce public debt in the aftermath of the coronavirus crisis in order to maintain investors’ confidence. But other countries with much higher debt burdens, for instance Japan, don’t face spiralling interest costs. As we expect UK interest rates to be very low for a long time, a return to economic growth and the passage of time will gradually erode the debt burden. That may mean the lurch to austerity will be less marked than after the GFC.
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