Triple A disaster

At the end of last week one of the credit ratings agencies finally downgraded the UK to AA1, bringing to an end the ‘precious’ AAA rating. Now this could be seen as a disaster as holding onto the triple A rating had been so important to George Osbourne, however a more pragmatic view should be taken.
When you read the full report you discover that not all of the credit rating agencies have downgraded the UK so far, I emphasise so far as later this year the others are probably going to follow. You also discover that the outlook becomes stable, meaning that they do not believe any further downgrade is foreseeable. With the rate at which we have been piling on the debt the last few years it is more surprising that it took so long for this to happen. There are only two major developed economies that now maintain the top rating.
The UK has lost the top rating due to the doubt that a new major economic shock could not be withstood. The type of shock of the scale of the collapse of the banking system.
Had the report not been largely supportive of the Government’s policies and approach, the only negative been the lack of growth so far, then this would have been very serious instead of the political problem it is. Also, had the UK lost it’s rating before the USA lost theirs it may have been more significant.
The political point scoring game is likely to be played at every opportunity is likely to go on for some time, this will provide a smoke screen to cover the massive inadequacies that currently pass for for a Labour economic policy.
The problem is we need an open debate about the economy, it is changing and needs to keep changing, there are many promising signs but we need a catalyst to fire the economy back into growth. There are things the Government could do to help start this, but the noise that losing the triple A rating is causing is likely to keep the real issues out of the headlines.

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