 The Office for National Statistics has released its latest round of data on government borrowing, showing a deficit of £62 billion for the month of April. That's the highest figure on record. In response to BBC and other outlets have been leading with the question of how we pay back these huge sums. However, having watched the various news bulletins today, in my opinion, these reports often raise more questions than they answer. So I'm going to show you a clip now of a BBC journalist explaining this supposed problem about the need to pay back this debt in the future. According to official estimates, the bill could top £300 billion. Now, that would be the biggest slice of the economy than at any point since the Second World War. And like anyone who's facing debts, the government has three options. It could look at spending, for example, pay freezes for public sector workers such as civil servants or indeed firefighters or nurses, but that would hurt households in particular some of those workers who'd been on the front line. It could look at raising taxes, but that might just hit those businesses and households at a time when they're struggling to get back on their feet. And it could mean breaking some election promises. So what about borrowing more? It's tempting and it is indeed very likely indeed, but there are a few problems with that. There is a limit to how much investors are comfortable with the government's borrowing before they start worrying about whether or not it's affordable to make the repayments. And these bonds are equivalent of long term loans. So effectively, we'll be asking our grandchildren to pick up the tax. There are no easy answers. In practice, tax and or spending will have to change. All of this means tough choices for Rishi Sunak, the chancellor. But ultimately, it's all of us who will have to pay the bills, perhaps at the point where we least fancy it or can least afford it. So that was a social media clip by the BBC economics correspondent, Darshini David, but I also saw earlier today sort of giving exactly the same argument on the BBC News Bulletin where presumably more people saw it. There are a few things that sort of worried me about that framing. And it reminded me a lot of 2008, which was that we were really going back to a household analogy. So she says, like anyone who's facing debts, the government has free options, cutting spending, raising taxes, borrowing more. Now, I mean, my concern there is, is the government borrowing like anyone else facing debts? Other people can't print their money. I'm obviously going to go to James for a moment for the expert take on on this. But some other sort of words which rang alarm bells for me was this idea that our grandchildren would be picking up the tab. So either we will have to pay this debt off now, or if we don't, that exact same sum of money will will will just push pain down the line onto our grandchildren. And there's also this idea that tough choices are inevitable. They have to be made, which obviously can very easily be weaponized to justify austerity. She's saying that there's not that much appetite for austerity at the moment, but just this whole idea of tough choices being necessary because of debt to me seems incredibly dangerous. James, watching that clip, did you have awful flashbacks to 2008? Do you think that the mainstream media are still going for this sort of household analogy, even if sort of newspapers like the Financial Times, for example, are being a bit more creative with what kind of response we could have right now? Well, it was probably one of the worst bits of economic coverage I've seen. I mean, it's like it was shockingly stupid and ill-informed, and it's nonsensical for the BBC to be putting these things out. It's misleading people. We should stop talking about framing, I think, quite as much as we do and start talking about what is right and what is wrong. It is categorically not the case that as a result of the exceptional spending to deal with this crisis, we will therefore have to change taxes and spending in the future that we have to pay back all this debt. To put it very simply, what we've got now is something like the Second World War. The Second World War was immensely expensive. At the end of the Second World War, Britain's debt to GDP was 270%. In other words, national debt, government debt was 270% of the entire economy. It was equivalent to 270% of the entire economy. That was necessary spending and borrowing because he had a water fight. He had to do this. He didn't stop fighting in 1941 and say, we borrowed too much. It's a similar thing here. You have to deal with the coronavirus, and that means spending a large amount of money. That's the first bit. The second bit is that at this point in time, interest rates, particularly for governments, are about the lowest they've ever been in human history, like ever. You can go for as long as they have been interests on things that you can charge interest on. Interest rates have never been as low as this. This week, the government had negative interest rates in some of its borrowing. In other words, people were paying the government for the privilege of lending it money. To produce something that says, oh, well, all this borrowing, tough choices ahead, when we can least afford it, it's so spectacularly far from where we actually are and what we should be talking about. It's not true. That's before you even get into the slightly more developed argument, which is that, yes, if people can't afford to have massive tax rises or see their incomes fall because they've been posed a public sector pay freeze, as was immediately flagged up, this is when you do not do those things because to do those things, trashes the economy. It's on every possible level. This is wrong, wrong, wrong. The third and final thing is that I don't know. The report accompanying this said economists say you have to do tax and spending to get out of this mess we're now in. Oh, dear, I can't think of a single economist, not one who says the response to this crisis is that we should be cutting spending and raising taxes. No one's saying this. If you dig out the observer on this Sunday, Philip Inman had a report on the right-wing think tanks who are all out for austerity back in 2008, 9, 10. All of them are basically saying we'll just have to accept more debt. We'll just have to put up with a bit more debt now because it's a crisis. This is what the free marketeers are saying. You haven't Smith Institute, the Institute for Economic Affairs. If they're managing to get this far in understanding where we are, why on earth is the BBC producing this nonsense? It's not just bad economics. It barely functions as an economic you can hear in the description of the world. God knows what they thought they were doing. I want to go really back to basics because there's the argument about do we have to pay it now or do we have to pay it in 50 years? There's also the more basic one. When she had the free cups, there were three options that we have, which is cutting spending. If we're in debt, it's cutting spending, raising taxes, or borrowing more money to pay off that debt. To me, it seems like there's also a fourth option, which is monetary financing or essentially printing money. Why would she not be talking about that? Should the BBC be presenting printing money at this point in time as a reasonable option, or do you think that's a sort of unnecessary distraction? To be honest with you, it's not something we need at this point in time. What's happened at the start of April is the Bank of England agreed with the government that if necessary, it could use the thing it calls the Ways and Means Facility, which is basically an overdraft that the government has with the Bank of England effectively. In other words, if this thing was going to be used, and the last time I looked at it, I don't think it's actually been put into action. I'll come on to why that is. If you're going to use this, then the Bank of England would be using its power as a bank to print money to just pay for the government's spending. You might want to do that if the government was having trouble raising money through more conventional means, which is this issuing of bonds. This is going to the bond markets and asking basically for a loan. The point of which the bond markets are paying you to borrow money is the point of which you have no problems whatsoever raising that money and raising that money for a long period of time. There is no real prospect right now of some spiking interest rates that will suddenly make all this hugely expensive. It's incredible. Resolution Foundation sort of sent a left think tank, had some analysis out in this a while ago, and even under scenarios where you have to borrow an awful lot of money, interest rates are now so low that the amount of interest you're paying is rock bottom. It's far below what you'd be paying in the 2000s, for example, with much lower rates of borrowing back then. So it's really, really cheap to do this. If it's really cheap just to borrow, there's no reason to start printing money. Now, if there was a problem borrowing money, this is an option and it's sitting there ready for use if it's needed. And so if it's borrowed just to be super clear, if it's borrowed, so we do ultimately have to pay it back, maybe at low interest rates, but you do have to pay it back. Why is that not passing on the burden to our grandchildren just to sort of like really lay it out in the basic sense? If it's borrowed from the financial markets and even if we pay it out over 50 years, is that not passing on the burden to our grandkids living in 2050? It depends what the burden is. I mean, if you issue a bond, the thing has a length of time over which it comes due and it has to be repaid. So the way it works is you pay as a government, you pay money to the bond holder, that's repaying. When you sell the thing, you get the money in and then you repay over time. That's how the thing works. The issue here is what are you paying it back with and when do you have to pay it back? Because if you take the Second World War, what basically happens coming out of it is there was no rush, there was no rush to do massive government spending cuts and this sort of thing coming out of the Second World War. What actually happened is we built a welfare state. We set up the NHS, expanded education, put in place all sorts of unemployment benefit, all of these things, actually expanded government spending significantly and then basically just wound the debt down gradually and you can do that if you have, you know, doesn't even have to be particularly high rates of growth, moderate rates of growth, a small amount of inflation and gradually this eats away at the amount of debt you're having to pay back over time. That is a simple option and Britain historically is very good at managing its government's debts relative to other economies in the world. That's why you can borrow so cheaply even for such long periods of time. So there's no reason to rush at this. You may as well just say, okay, we'll just park this, it'll be sitting there, we'll roll the debt over, we know we can roll the debt over because the interest rates are low, the economy is growing a bit, you can just keep doing this and gradually the debt will get paid back because your economy is growing, inflation is there, the thing will be a little away over time. That's what we did after the Second World War. Something like that seems a sensible thing to do now. You just manage the process of the debt. You don't have to rush to repay the thing and if you do rush to repay the thing, if you take the last 10 years when we did have a rush to repay the debt from the financial crisis, you basically crash the whole economy, ideally crash the whole economy or you just slow it down, you get a horrible drawn out long recession. Now, the most likely prospects coming out of this is a very long drawn out horrible recession. The worst, the absolute literal worst thing a government could do is to say, right, the thing to do right now is try and pay back all this debt we've got. You will make that recession worse. You will generate a second Great Depression if you do that at this point in time. It is spectacularly bad. It is unbelievably bad for the BBC to be trying to present this. I mean, I'm kind of laughing because it's just like you wouldn't want Earth, they were thinking, did they just not talk to anyone who has any economic knowledge at all? They just thought they'd put this thing out. It beggars belief. That's why I just don't think we should get into a conversation about how we need to rush to repay the debt. We can manage this and managing it is also part of how we're going to recover from this crisis. I was going to bring in Aaron. What James is saying around inflation and nominal GDP growth is what happened to Western Europe after the Second World War. We've been here before. In the example of Britain, it wasn't just after the Second World War, we had high levels of debt to GDP. In the mid-19th century, Britain, and of course, it was the world's global economic power, very different context today. But in terms of this idea of debt to GDP is an absolutely bad thing. In the mid-19th century, you're looking at about 250% of GDP. Is credit a good thing? Can it be a good thing? Yes. Mortgages can be good rather than having to save up £300,000 to buy a house. We're using their household example often in very bad ways. I'm using it purely as an analogy, by the way, because states and households are different. But we know that credit can sometimes be very useful. That means I can get something which creates more value in the long term. And I can get that money today and I can pay it back tomorrow. Very useful mechanism. And the idea that you wouldn't use the exact same mechanism when you can borrow credit really cheaply, fantastic. Who doesn't want a cheap mortgage loan? Who doesn't want a cheap business loan? Or when states like Britain borrow on international markets, they get the cheapest loans of all. And so what they could be doing is to invest in things like infrastructure, human capital, schools, housing. They can generate revenues from that. They can create high levels of productivity, high levels of output. They can engage with epochal problems like climate change, demographic aging, all of these things. And that is a vanilla argument. That is not a radical argument. Like James says, even the Adam Smith Institute, the IEA, the sense of policy studies, all these kind of batshit right-wing think tanks, right now, they understand the scale of the problem is so big, so unprecedented, at least in peacetime, that they're not going to fart about with what they called before 2008, expantry fiscal contraction, which was to say, you can reduce the footprint of the state, but somehow, magically, you'll get aggregate demand going up and job creation, that job, it doesn't happen, it didn't happen. It was wrong. It was based on a completely, actually, James can talk about this in accounting area in a certain case, studied by some certain economists who realized they'd made some mistakes a few years later. But in terms of, in terms of what we move sort of now, what we need to understand in next, let's say, a year's time, the average household is going to be in more debt than it is today. The average individual, the average house will be in more debt. The average business will be in more debt. The government will be in more debt. Now, you can't have a situation where households have got to pay back the debt, and by the way, that's labor policy on the rent suspension, for instance. Households have got to delieverage. Businesses have got to delieverage, and the state has to delieverage. What does that mean? It means nobody's spending. What does that mean? It means there's no demand. You turn a recession into a depression, and that's the one thing we now have to avoid. Again, this is elementary basic common sense. The fact that the BBC is preaching a wholly different gospel really speaks volumes about the quality of their output when it comes to this stuff, and how it hasn't moved on from the debate in 2010. This entire mantra of cuts on austerity has been disproven. We've just lived through a failed 10-year experiment. It is a case study in what not to do.