He\’s OK today, as far as he goes, is Mr. Hutton:
But as the forecasters say, fortunately our plans to service the debt is within the margins of safety, never rising above 10% of tax revenues even at the peak moment for public debt in 2014/15. It started from a low base and interest rates are very low.
What if interest rates rise a little?
They also remark that whatever the credit-rating agencies may say, Britain has not defaulted on its debt since the 14th century. There is zero risk today.
In the largest study of sovereign defaults, we find that the flash point is when debt interest goes over 12.5% of GDP.
Now yes, tax revenues and GDP are different things: but to get there all we need really is a doubling of interest rates and a shortfall in the growth projections (which would reduce tax revenue and increase current borrowing, boosting the stock of debt).
Looking at Greece, anyone really want to bet that interest rates won\’t double over the next 5 years?
Now I agree that the risk isn\’t huge: this isn\’t a certainty. But the risk ain\’t zero neither.