Conclusion 1

The pandemic will leave behind a large increase in the public debt and, possibly, a rise in ongoing borrowing into the medium to longer term. However, low interest rates have helped to open up fiscal space, and our expert witnesses said that now is not the time for tax rises or fiscal consolidation, which could undermine the economic recovery. However, the public finances are left more exposed to rises in interest rates; and witnesses told us that economic growth, inflation and measures to lower interest rates probably could not on their own be relied upon to stabilise or reduce the public debt. Indeed, interest rates increasing from current low levels would put further pressure on the public finances. Significant fiscal measures, including revenue raising, will probably be needed in future.