Ed Balls MP, Labour's Shadow Chancellor, responding to tonight's credit rating downgrade by Moody's, said:
"This credit rating downgrade is a humiliating blow to a Prime Minister and Chancellor who said keeping our AAA rating was the test of their economic and political credibility.
"It would be a big mistake to get carried away with what Moody's or any other credit rating agency says. Tonight's verdict does not change the fact that the credit rating agencies have made major misjudgements over recent years, not least in giving top ratings to US sub-prime mortgages before the global financial crash.
"But what matters is the economic reality that the credit rating agencies are responding to. Moody's themselves say the main driver of their decision is the weak growth in Britain's economy. Their judgement is in response to nearly three years of stagnation, a double-dip recession, billions more borrowing as confirmed this week and broken fiscal rules. This is why the Chancellor is fast running out of credibility.
"George Osborne said keeping the credit rating was the key goal of his economic policy. As his economic plan has floundered, it has been the last thing he has clung on to. And bizarrely his response tonight suggests he is not reflecting on why things have gone so badly wrong, but using this downgrade as one more reason to plough on with his failing plan - regardless of the damaging impact on struggling families and businesses.
"The issue is no longer whether this Chancellor can admit his mistakes but whether the Prime Minister can now see that, with UK economic policy so badly downgraded in every sense, things have got to change.
"In the Budget the government must urgently take action to kick-start our flatlining economy and realise that we need growth to get the deficit down. If David Cameron and George Osborne fail to do so and put political pride above the national economic interest we face more long-term damage and pain for businesses and families."
1. The 2010 Conservative Party General Election Manifesto made safeguarding Britain's credit rating the number 1 “Benchmark for Britain”.
“Benchmarks for Britain. For the first time, the British people will have eight clear and transparent benchmarks against which they can judge the economic success or failure of the next government. We will be accountable and open. These are the eight Benchmarks for Britain. Achieving them over the next Parliament will mean we have put Britain back on its feet and are building a new British economic model, very different from the debt-driven economy of recent years.
Change the economy | Benchmarks for Britain 1. ensure macroeconomic stability: We will safeguard britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a Parliament.”
2 . The Chancellor George Osborne has repeatedly hailed the views of the credit rating agencies as the measure of success for economic policy. When Britain was first put on negative outlook by Standard and Poor’s in 2009, the then Shadow Chancellor George Osborne said that the country’s "economic reputation is on the line" and called for an early general election:
"It's now clear that Britain's economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now… For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative."
George Osborne, The Guardian, 21 May 2009, http://www.guardian.co.uk/business/2009/may/21/standard-poors-uk-economic-outlook
3. When Britain was taken off negative outlook by the Standard and Poor’s credit rating agency in October 2010, following figures showing 0.8% growth in the third quarter of 2010, George Osborne said it was a “vote of confidence” in his policies:
"What you see today, in an uncertain global economic environment, is Britain growing, growing strongly, the strongest growth we have seen in this part of the year for a decade, and also our country's credit rating being secured. That is a big vote of confidence in the UK, and a vote of confidence in the coalition government's economic policies."
George Osborne, The Guardian, 26 October 2010, http://www.guardian.co.uk/business/2010/oct/26/gdp-growth-osborne-construction
4. In May 2011 George Osborne boasted that this move was thanks to the Government’s policies and had delivered "economic stability":
"Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again."
George Osborne, Hansard, 10 May 2011: Column 1011,
4. But in February 2012 Moody’s put Britain on negative outlook, citing "weaker growth prospects":
"The key drivers of today's action on the United Kingdom are: 1) The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside. Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16." Moody’s statement, 13 February 2012, http://blogs.news.sky.com/therealeconomy/Post:a1b96258-7135-4f6b-8853-b33d8a30fce8
5. In May 2012, Fitch also put Britain on negative outlook, saying a downgrade would be triggered if there was "a material downward revision of the assessment of the UK's medium-term growth potential".
6. When Standard and Poor’s - which has subsequently put Britain on negative outlook - reaffirmed Britain's credit rating in July 2012 George Osborne claimed "the world has confidence" in his policies:
"On the day Britain welcomes the world to our country for the Olympic games, this is a reminder that despite the economic problems we face, the world has confidence that we are dealing with them." George Osborne, 28 July 2012,