Alex Douglas on Private Debt Forgiveness

CEPPA’s own Alex Douglas recently participated in a workshop on the lockdown exit strategy; check out the recording here.  Further information on the workshop:


A key part of the Government’s response to the Coronavirus economic crisis is to support private sector lending (e.g., TFS-SME and CBILs) and to ease the burden of household debt repayments (e.g., mortgage holidays). Looking ahead to when the economy stabilises, firms and households will have higher debt burdens. Some argue that high private debt burdens prior to the Global Financial Crisis had not been resolved, merely accommodated by an exceptional period of low interest rates. High debt burdens reduce incentives for risk taking and perhaps productivity, as well as creating misery for those unable to manage. Is there a case for the UK to introduce a debt reduction strategy? This may be through debt cancellation (forgiveness), debt to equity conversion or even inflation. How might this be delivered in practice? Presumably there would be consequences for creditors, such as banks and insurance companies. What might be the medium-term economic consequences in terms of inequality, investment and productivity? This maybe an opportunity to move towards more equity finance. Should this to be the part of the Government’s Exit Strategy?

Other Participants:

Katharina Pistor: Edwin B. Parker Professor of Comparative Law at Columbia Law School and Director of the Law School’s Center on Global Legal Transformation

Franklin Allen: Professor of Finance and Economics at Imperial College London

Rodrigo Olivares-Caminal: Professor in Banking and Finance at the Centre for Commercial Law Studies (CCLS) at Queen Mary, University of London