It is hold your nerve time for the economy in borrowing numbers game

It’s easy to find a galaxy of horrendous numbers reflecting the economic cataclysm of lockdown: take your pick from the £62bn rise in public borrowing to the 18.1pc slump in retail sales.

In truth there are only two numbers that should really matter to Rishi

Sunak, the Chancellor. The first is this: £5bn. As the UK’S deficit soars towards wartime levels, that is the interest paid by the nation on its mammoth £1.9 trillion debt pile in April – and it is actually £1.2bn lower than last year.

Second, even after the biggest surge in borrowing we have seen outside of a war, the Government’s payments on debt interest as a share of revenues have barely budged, at 3.6pc.

In the pre-covid world, students of fiscal matters may remember that Sajid Javid, Sunak’s predecessor, set a rule putting a 6pc cap on the cost of debt

interest as the Government pledged an extra £120bn in investment as part of an “infrastructure revolution”.

Even in the morass of red ink flooding over yesterday’s numbers, the fact that the Chancellor still has such room for manoeuvre against his own target should be a comfort.

In these turbulent times, risk aversion among investors is such that they were even willing to pay to lend to Her Majesty’s Government this week. And while the UK’S debt to GDP ratio is clearly heading towards three figures, this hardly matters when investors are good for the cash, and the Bank of England is in the market snapping up gilts faster than the Debt Management Office can issue them.

The current low borrowing costs offer another reason why Sunak should ignore the blandishments of Treasury hawks calling for a fresh burst of austerity just as the economy begins picking its way out of the wreckage.

The menu of options in the document leaked to The Daily Telegraph recently – from tax hikes to a public sector pay freeze – is as good a way as any of killing the recovery stone dead. Sunak should be tax-cutting his way out of this mess instead, through measures such as lopping employers’ National Insurance contributions to encourage them to retain staff.

These figures are terrible but they are already history and should improve gradually as the economy opens up, as purchasing manager surveys have signalled. High borrowing numbers should be less of a concern than mitigating the effects of an unemployment surge that could be even more damaging for the public finances over the longer term.