Robert Peston: If this is a debt crisis, it's afflicting the whole rich West
The £15 billion spent on PPE, personal protective equipment, since March is one of those numbers that once it's in your head, it's impossible to unthink it, like a ghoul from a nightmare.It gauges both the scale of the health and economic crisis we're enduring, but also quite how astonishingly unprepared the government really was.
Remember at the beginning the Health Secretary Matt Hancock said we had more than adequate stocks of PPE because of no-deal planning.Just for the record, the £15bn dispensed on face masks, gowns and visors - which have a user life of anything from a day to a few weeks - would, on the government's sums, be enough to pay for at least 18 new hospitals.Which is not to argue, of course, that Matt Hancock should have scrimped on the PPE - although for the Government to spend quite that much, but still have healthcare workers complaining they were unprotected is quite an achievement (and will be a focus of the totemic public enquiry, as and when).The £15bn for PPE is also just 7% or so of all the additional spending by the government to protect our health and the economy over the past three and a bit months. It's why, with tax revenues collapsing with the collapsing economy, the government is set to borrow something like £350bn just in this year, as the FT points out, equivalent to close to a peacetime record-setting 20% of our national income.On the Peston show last night, I asked the Business Secretary Alok Sharma whether borrowing at this rate was sustainable - noting that it was more than twice the deficit as a share of national income as what was being borrowed after the 2008 crash, and which the Tory Party at the time regarded as end-of-the-world recklessness.Alok Sharma said what every politician from every mainstream party says, namely that the UK would be in the direst of straits if the money hadn't been spent, and that it is only sensible for the Chancellor to keep spending to support an economic recovery and keep unemployment to a minimum.Who would argue?But there remains a question of whether the consequential rise in the national debt, to more than 100% of national income, is sustainable forever, and whether some thought should be given to the long-term consequences.If nothing else, there should presumably be a plan to cut the annual increase in borrowing from its vertigo-inducing height to something nearer terra firma, say a pedestrian 2% or 3% of GDP.Alok Sharma's point interest rates are at a record low and it has been years since the UK encountered reluctance from investors to provide the cash is the kind of backward-looking quest for comfort that I've encountered far too many times from the bosses of businesses whose foot is on the accelerator to insolvency.For the avoidance of doubt, the UK is never going bust. With our own currency and independent central bank, able to create money at will, there's always the remedy of extreme degradation of the currency.But I am not sure that is so much of a comfort. Living in a country whose prosperity is undermined by the cancers of high inflation and high interest rates is best avoided.There is comfort to be had, though, as I mentioned on News at Ten a couple of weeks ago, in that the bloating of the UK's official government debt is a phenomenon afflicting every single rich western country.The latest projections from the IMF, for example, shows there are plenty of rich competitor countries with bigger debts than the UK's 102% of GDP. On the IMF's projections, the debts of Spain and France are 25 percentage points higher and Italy's more than 60 percentage points higher. Even the debts of Germany, Canada and the US are greater, by the fiscal equivalent of a sneeze, a few percentage points and 40 percentage points respectively.To put it another way, if the borrowing explosion is a crisis, it is not a peculiarly British crisis, but it is a crisis of the whole west (and Japan, which for decades now has muddled through with massively higher debts).And what flows from that really matters.First, when international investors are looking to place their funds in a country or are choosing which government's debt to hold, in the ugly contest held for borrowers the UK is by no means the ugliest. So even without the Bank of England's voracious appetite for Sunak's paper, there is probably an enduring market for UK government bonds.Second, and more importantly, if the idea gets round that all high borrowing countries have to retrench any time soon, the whole world will be in the deepest darkest doo doo - because this year's global recession will just go on and on and on.Which means that - just like the virus itself - the solution to the global economic challenge cannot be reached with each country suiting its own peculiar needs and autonomously reversing stimulus in a lethal game of beggar my neighbour.What is required is massive, perhaps unprecedented, global coordination to ease the journey to whatever the new economic normal may look like.At this high point of populist nationalism, we urgently need the giant penny to drop that putting the world first is the better route to save the nation, and that leaders and governments must rediscover the virtues of international co-operation.
Otherwise the virus will send us hurtling back to the gloom and mayhem of the 1930s.