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100% debt to GDP ratio is not magical

This letter was published in The Times, 3 March 2021

and was signed by 49 leading economists including many PEF Council members

Sir, 

According to leaks, the Treasury believes it is vital that the UK keep public debt below 100 per cent of GDP, so making short-term tax rises necessary. This is economically illiterate. As the OECD and  IMF  have said, the imperative  is to get the UK out of the Covid recession. This requires a fiscal stimulus, not a retrenchment. Extra public spending is needed to create business demand and jobs for those made unemployed.


There is nothing magical about the figure of 100 per cent of GDP. Whether debt is sustainable depends on how the economy is growing and the rate of interest. Today the government can borrow for 30 years at a  real interest rate of close to zero. Because of this, its debt interest payments are lower now than they were ten years ago. The Bank of England has already bought 80 per cent of government debt over the past year and can continue to do so, thereby keeping interest rates low.


As the OECD has now accepted, austerity policy after the 2008 financial crash retarded the UK’s recovery and  slowed actual deficit reduction. It would be a tragedy if wrongheaded economics was used to justify the same mistake now.

Yours

David Blanchflower, Professor of Economics, Dartmouth College and University of Glasgow, and former member of the Bank of England Monetary Policy Committee

Mark Blyth, William R. Rhodes ’57 Professor of International Economics, Brown University

Victoria Chick, Emeritus Professor of Economics, University College London

Jennifer Churchill, Senior Lecturer in Economics, Kingston University

Christine Cooper, Professor of Accounting, University of Edinburgh

Andrew Cumbers, Professor of Regional Political Economy, University of Glasgow

Mike Danson, Professor Emeritus, Heriot-Watt University

Jerome De Henau, Senior Lecturer in Economics, The Open University

Panicos Demetriades, Professor of Financial Economics, University of Leicester

Danny Dorling, Halford Mackinder Professor of Geography, University of Oxford

Sheila Dow, Emeritus Professor of Economics, University of Stirling

Gary Dymski, Professor of Applied Economics, University of Leeds

Diane Elson, Emeritus Professor, University of Essex, and Chair, Commission on a Gender Equal Economy

Felix Fitzroy, Emeritus Professor of Economics, University of St Andrews

Giuseppe Fontana, Professor of Monetary Economics, University of Leeds

Daniela Gabor, Professor of Economics and Macro-Finance, UWE Bristol

Stephany Griffith-Jones, Emeritus Professorial Fellow, Sussex University and Financial Markets Program Director, IPD, Columbia University

Barbara Harriss-White, Emeritus Professor and Fellow, Wolfson College, Oxford University

Philip Haynes, Professor of Public Policy, University of Brighton

Susan Himmelweit, Emeritus Professor of Economics, The Open University   Will Hutton, Research Associate, Centre for Economic Performance, LSE

Michael Jacobs, Professor of Political Economy, Sheffield Political Economy Research Institute, University of Sheffield

Richard Jolly, Professor and Honorary Associate, IDS, University of Sussex

Calvin Jones, Professor of Economics, Cardiff Business School, Cardiff University

Sue Konzelmann, Reader in Management, Birkbeck, University of London

Neil Lancastle, Senior Lecturer, De Montfort University

Lorena Lombardozzi, Lecturer in Economics, The Open University

Robert McMaster, Professor of Political Economy, University of Glasgow

Jo Michell, Associate Professor of Economics, UWE Bristol

Johnna Montgomerie, Professor of International Political Economy, King’s College London

Simon Mohun, Emeritus Professor of Political Economy, Queen Mary University of London

Henrietta Moore, Founder and Director, UCL Institute for Global Prosperity

Susan Newman, Professor and Head of Economics, The Open University

Ozlem Onaran, Professor of Economics, University of Greenwich

Jonathan Perraton, Senior Lecturer in Economics, University of Sheffield

Thomas Piketty, Professor of Economics, Paris School of Economics 

Andy Ross FAcSS, Visiting Professor of Economics, Loughborough University and Birkbeck College, University of London

Josh Ryan-Collins, Head of Finance and Macroeconomics, UCL Institute for Innovation and Public Purpose

Malcolm Sawyer, Emeritus Professor of Economics, University of Leeds

Marianne Sensier, Research Fellow, University of Manchester

Lord Prem Sikka, Emeritus Professor of Accounting, University of Essex

David Soskice FBA, Professor of Political Science and Economics, LSE  

Frances Stewart, Emeritus Professor of Development Economics, University of Oxford

Tony Thirlwall, Professor of Applied Economics, University of Kent

Jan Toporowski, Professor of Economics and Finance, SOAS University of London

Sophie van Huellen, Lecturer in Economics, SOAS University of London

Roberto Veneziani, Professor of Economics, School of Economics and Finance, Queen Mary University of London

David Vines, Emeritus Professor of Economics, Oxford University

Geoff Whittam, Professor, Glasgow Caledonian University Business School

Simon Wren-Lewis, Emeritus Professor of Economics, University of Oxford   

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