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Two of the country's most respected economists took part in a debate on the nation's debt in Parliament yesterday.
Lord Burns, chairman of Santander UK and Channel 4, proposed the motion that debt reduction must be accelerated.
He was opposed by Lord Eatwell, president of Queen's College Cambridge.
The event was organised by the all-party parliamentary group on management and CMI.
Ruth Spellman, chief executive of CMI, began proceedings. She said many of the institute's 86,000 members are nervous about the future. Managers are cutting back on pay, business overheads and investment.
Management and leadership are the key skill gap in the economy, she added.
Lord Burns said the size of the UK's debt is unprecedented and will not be eliminated simply by the resumption of growth – a large part of it is structural debt.
An adjustment can be made over a number of years, but restructuring the tax system will take time and an "early down payment" of the debt is needed.
The government has projected a modest reduction next year then bigger falls in the future – Lord Burns argued we need to go further.
However, the spending on rising benefits as a result of the downturn should be allowed to increase.
Lord Burns said the structural budget deficit will only decline with a combination of spending cuts and tax rises.
Waiting for a recovery before beginning to cut is over-optimistic, he said.
The government is unwilling to set out where it will cut and have projected a decline in spending but given no detail of how that will be done.
Lord Burns added that the bank bailout was a one off event that adds to the "stock of debt" but not the structural debt.
Current fiscal plans are based on pre-recession projections and need to be corrected.
Lord Eatwell, who is also CMI's chief economic adviser, said the role of fiscal tightening is exaggerated.
The reduced expenditure of the private sector has been replaced with public spending, cushioning the economy.
Lord Eatwell said the deficit is a good thing and is a key element in stopping the recession becoming a major depression.
In fact, the UK's fiscal stimulus is too small at 1.6 per cent of GDP, the smallest in the G7.
Germany's was four per cent, which has helped turn their economy around.
The deficit has allowed institutional investors and insurance companies to buy government bonds, "de-risking" their portfolio at the same time and making them more secure.
Lord Eatwell argued that as the government is borrowing from UK insurance and pension funds, there is no burden to the country's economy as a whole.
Last week's government bond auction was oversubscribed more than twice over – "the money is pouring in," he said.
Lord Eatwell said the average maturity of UK debt is 14 years, compared to six on Germany and five in the US.
The UK has, in other words, borrowed long. In previous recessions, taxes were raised and monetary policy was loosened.
But in this recession monetary policy is already very loose, he said.
Lord Eatwell said he would rather have "a bit of inflation" than a big fall in production and rise in unemployment.
The growth of the deficit has been crucial in stopping the economy falling into depression.
Members of the APPG on management also attended the event.
Lib Dem peer Lord McNally said that idea of an "early down payment" as proposed by Lord Burns is "gesture politics" and the cost would be social cohesion.
The voters know that there are tough times ahead and the government "must avoid the sense of punishing people for previous sins," he added.
Meg Munn, Labour MP for Sheffield Heeley, said investment in skills is key to the future of the economy, but the poorest are still not getting the training they need.
Lord Eatwell was asked if governments, unlike businesses or individuals, can run a deficit indefinitely. He replied that the UK has been in debt for 220 of the past 250 years.
Dods Parliamentary Communications Ltd