Say you had the opportunity to take out a loan at a reasonable interest rate to buy a house. In our current housing market, this could potentially save you tens or even hundreds of thousands of pounds in rent over a lifetime. But you decided not to, because £230,000 (the average UK house price at the time of writing) is a lot of money.

Would that be a sensible economic decision? No, it clearly wouldn’t. Neither would it be sensible, if you were a small business owner, let’s say a baker, for you to pass up the opportunity to borrow to invest in a game-changing new oven which made your cakes twice as delicious and would pay for itself many times over during the course of its life-time. Bad decision.

You don’t need to be an economist to know the difference between good and bad debt. Good debt is a sensible investment that will make us better off in the long-term and won’t harm us in the short-term; bad debt is debt that comes with rip-off interest rates and charges, or which we're not sure we'll be able to pay back. This difference is a common sense that we confidently apply to our lives every day. Many people make the sensible economic decision to invest in themselves, their families, their education, their business, and their future wellbeing.

Why then, do we struggle to apply this same logic to public debt? And more importantly, why is it that many of our politicians and political commentators, people who definitely should know better, can’t seem to either?

With less than two weeks to go in this election campaign, political commentary about the manifestos and spending promises have exposed a profound amount of ignorance, fearmongering and misinformation about UK public debt.

The story we’re being told is simple and familiar: that public debt is bad, and that if the government borrows more, we risk bankrupting the country. It’s the story that was used to justify austerity and a programme of wreckless and unnecessary public spending cuts that have now been found to have caused 130,000 unnecessary and preventable deaths, as well as the slowest economic recovery on record. It’s a story which was wrong in 2010, and wrong now.

Government finances are obviously more complex than personal or business finances, and a government’s budget is different from a household’s budget in some very important ways. However, the same basic questions for responsible household borrowing apply to responsible government borrowing. First, what does your current debt burden look like? Second, how much will it cost you to borrow? And third, crucially, what are you going to spend the money on?

My organisation, Jubilee Debt Campaign, was set up to tackle and prevent public debt crises. We know a public debt problem when we see it. And we’re clear that the UK does not have a problem. In fact, the answers to the first two of these questions point to a historic opportunity to invest in our collective future. Let’s take them one by one:

The UK’s public debt burden

Despite growing significantly after the 2008 financial crisis, by international and historical standards, UK government debt is still relatively low. Of all G7 economies, only Germany has a lower government debt compared to the size of its economy than the UK. Total UK government debt is currently 85% of GDP.

What’s more, the type of public debt we hold as a country is very ‘safe’ by public debt standards. In all the public debt crises that we have worked on across the globe, the main risk factor is debt that is owed outside the country. ‘External debt’ is particularly dangerous because it leads to money flowing out of a country in interest and principal payments, with repayment subject to change due to factors outside the borrowing government’s control. For example, lots of countries in the Global South owe money in dollars, so changes in the strength of the dollar relative to their currency can have a big impact on the size of their debt repayments in real terms.

The UK has very little to worry about on this front. Virtually all of our public debt is owed in pounds sterling – a currency we have control over. A quarter of our debt is owed to the Bank of England, part of the UK government, and so effectively costs nothing. In total, 80% of our public debt is owed to people and institutions in the UK.

Public debt is an important investment vehicle for our pension funds and insurance companies. For UK pension funds in particular, public debt is an important, secure long-term asset, passed down through the generations as one generation cash pension funds in and the next pays into them. This leaves just 20% of UK government debt owed to people outside the UK.

Furthermore, not only do we have a lot of control over our public debt, but our debt payment burden is low. The government is paying virtually the lowest amount of interest on its debt in recorded history (as a percentage of GDP). And if we really needed to, because it made economic sense to borrow to invest, we could mobilise a lot more government revenue through taxation to make debt repayments. The UK government currently has one of the lowest tax revenue collection rates of the major industrialised economies compared to the size of our economy.

The UK’s public debt opportunity

UK public debt is, in fact, very much in demand. The growing concentration of wealth globally combined with low global interest rates and global economic uncertainty, means that investors are desperately seeking safe places to store their wealth. Public debt issued in the currency of the borrowing government is one of the safest global assets. Around a quarter of the global government bond market debt now has negative yields, meaning that investors are purchasing government debt with negative interest rates: basically, paying governments for the privilege of lending to them.

While things haven’t gone quite that far yet with UK public debt, we’re very close. The government can currently borrow at the cheapest interest rates on record: at a fixed rate of 0.7% interest for 10 years, or 1.2% for 30 years. Our public debt is considered a safe haven by investors, and even the chaos and uncertainty of Brexit hasn’t affected this. In fact, whenever there is uncertainty about the UK economy, interest rates on UK government debt fall as demand increases – because it is a safe asset.

With a relatively safe public debt burden and an opportunity to borrow at record low interest rates, we have an unprecedented opportunity to invest in our futures. We have a lot of scope to temporarily and cheaply expand public debt without the risk of bankrupting the country, so long as the money is invested wisely and productively – such as in public services and infrastructure which will stimulate inclusive and sustainable growth, and save the government and citizens money in future.

There is no shortage of potential homes for that investment. Investment in publicly-owned renewable energy infrastructure will create jobs, reduce energy costs for homes and businesses, and boost local economies, while helping to avert the climate catastrophe and reducing the money we send overseas in payment for fossil fuels. Investments to expand good quality public housing will bring down housing costs, create jobs, stimulate local economies, and reduce the amount of public money that is being handed over to private property owners through housing benefits – saving citizens and the government money in the long-term.

A private debt crisis, not a public one

We currently have nothing to fear from more government borrowing, so long as the money that is borrowed is invested wisely. But that doesn’t mean that we have nothing to fear from debt. Far from it. While our public debt burden is very safe and relatively low, UK citizens and businesses are leveraged up to our eyeballs. The UK is not at risk of a public debt crisis, but we are very much at risk of a private one.

The total debt of the UK’s private sector debt, i.e. companies and households, is estimated at over 400% of GDP, more than four times the size of UK government debt. This includes mortgages, student debt, unsecured household debt – things like loans, credit cards, overdrafts – and corporate debt.

Unsecured household debt has now surpassed its pre-crisis peak and is at record levels. Millions of families across the UK are now struggling with debt repayments, with three million UK households now spending more than a quarter of their income paying back their debt. Low wages, precarious work, rising housing costs, and welfare cuts – because of misguided efforts to reduce public spending in the wake of the 2008 financial crisis – mean that more and more families simply aren’t earning enough to live and are having to borrow just to put food on the table. And the lack of regulation of banks and lenders mean that, with a few exceptions, lenders can charge whatever interest rates and fees they like for consumer credit products, with a growing body of evidence showing that the poorest families actually pay a poverty premium for access to credit.

While growing numbers of households have had little choice but to borrow, UK PLCs have been voluntarily taking on more debt, and often not for the right reasons. With interest rates at a record low since 2008, companies have been gorging themselves on the availability of cheap credit and, rather than using this for capital investment, many have instead been spending it on share buy-backs to artificially pump up their share prices. This has kept shareholders happy, helped to prop up an image of corporate success, and handed execs some nice pay-outs themselves in the process.

Globally there are increasing warnings of a growing corporate debt bubble and concerns about what might happen if it bursts. The Bank for International Settlements, the body that coordinates central banks, has warned of a dramatic rise in borrowing by businesses with low credit scores, and also the growth of collateralised loan obligations (CLOs), which are collections of low-grade corporate debts packaged for sale to investors, similar to collateralised debt obligations which amplified the 2008 crisis.

The collapse of heavily-indebted Wrightbus and Thomas Cook early this year signal important warnings about the unsustainable debt burden on UK PLCs. But a corporate debt crisis wouldn’t need to start in the UK for us to be badly affected. Our private sector is the most exposed of any rich country to global financial volatility, meaning we are the most at risk of impacts from financial and debt crises starting elsewhere in the world.

The debt crisis we need to be worried about isn’t one brought about by a growth in responsible borrowing and investment by the government. It’s one where corporates – whether here in the UK, or elsewhere in the highly-connected global economy – take their borrowing binge a step to far, leading to bankruptcies, a contagion effect, job losses, a recession, and an even worse crunch for the millions of British households who are already only just scraping together an existence. It’s towards that growing risk of a private debt crisis that the attention of our politicians and media commentators should be turned.

References for all of the statistics included above, along with more detailed analysis of UK public and private debt, can be found here.