Article taken from: www.telegraph.co.uk
The Chancellor should perhaps have begun his spending statement by thanking the Bank of England and the financial markets for their help; very little of the Government’s Covid response would have been possible without the record low interest rates they provide. Thus it is that although the Government will be borrowing close to a fifth of GDP this financial year to fund its pandemic response, the biggest such proportion since the war, the interest rate bill on this massively expanded pool of national debt is actually falling. […] Any appreciable rise in rates and the austerity which the Chancellor is so keen to avoid becomes a raging certainty. […] This is because the Government, in effect, pays no interest at all on the debt the Bank acquires under its asset purchase programme. […] Sunak doesn’t at this stage propose overt austerity, even if he hints at it, but the best way of paying down debt is to stimulate growth.
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