London: Britain’s opposition on Saturday tore into the government over what it called failed policies, after Moody’s stripped the country of its coveted triple-A debt rating.
However, while analysts called the loss an embarrassment for finance minister George Osborne and his handling of Britain’s debt and deficit problems, they said the downgrade would have a limited impact in the international markets.
In an expected rebuff to London’s hopes that sharp spending cuts would both gradually eliminate the deficit and give growth a boost, Moody’s rating agency cut Britain’s grade by one notch to Aa1.
Labour opposition finance spokesman Ed Balls tore into Chancellor of the Exchequer Osborne, saying the entire point of his austerity drive — retaining AAA status — had failed.
“The chancellor said this would be a humiliating blow and the first test of his policy was to avoid it, so clearly for him politically, it is a very, very bad moment,” he told BBC television.
“Economically, the credit rating decision itself makes no difference at all.
“What the credit rating agencies are doing though is reflecting the reality and the reality is an economy which is not growing, a deficit which is getting bigger, families in real stress and a government which is ploughing on regardless with a plan which is not working — saying ‘the medicine is not working, let’s increase the dose of the medicine’ that is completely crazy economics.”
However, Howard Archer, chief UK economist at IHS Global Insight research group, said that the market had been anticipating the downgrade for some time, though the pound sterling currency may be vulnerable.
“The UK’s loss of its AAA rating is an embarrassment for the government,” he said.
“It does focus attention on the UK economy’s extended and ongoing serious problems.
“The loss of the AAA rating certainly puts pressure on Mr Osborne to come up with more initiatives in the [March 20] budget to try and boost growth.
“While an embarrassment for the government and a cause for piqued pride, we suspect that the loss of the AAA rating will have only a limited negative impact for the UK economy. This was the case for both France and the United States.
“There are so few countries left now with a AAA rating, that to lose it is not the stigma or major threat to market confidence that it would have been say a couple of years ago.”