How worrying is Britain's debt? Surprisingly, we economists say: not very | Ethan Ilzetzki

Right now, the burden is manageable - but that doesn't mean we should take our eyes off the deficit clock

Ethan Ilzetzki is an economics lecturer at the LSE. He heads the Centre for Macroeconomics research panel

The coronavirus pandemic has taken a calamitous toll on the economy, with unemployment in April 2020 rising faster than in any month on record. The Treasury has responded with unprecedented measures to support workers, businesses and the self-employed, leading to a public deficit of 300bn this year.

How concerned should we be about the public debt, forecast to exceed the size of the UK economy? Public debt results when the government spends more than it raises in tax revenues - runs a public deficit - and borrows money to cover the gap. The government then pays interest on this debt, which is eventually repaid or rolled over by new borrowing. As long as interest rates are low - they are currently nearly zero - this poses few costs. The economy may also grow, generating more tax revenues and making it easier to repay the debt. But if interest rates rise faster than the economy grows, the public debt may increase to unsustainable levels. These may eventually require budget cuts or tax increases, often referred to as austerity.

These views are a far cry from the calls for budgetary cuts during the global financial crisis

Related: The scare stories about government debt are back. Ignore them | Simon Wren-Lewis