AAA Credit Rating Lost: Osborne Defiant
George Osborne has come under attack over what Labour calls his "catastrophic economic policy failure" after the UK lost its top-grade AAA credit rating.
International agency Moody's downgraded it by one notch to AA1, citing slow growth and a rising debt burden.
The Chancellor said the coalition would not "run away" from its economic problems and it was determined to stick by its plan for recovery.
The downgrade is a major blow for Mr Osborne, who has been coming under increasing pressure to take action to stimulate the economy.
In the last election, Mr Osborne made safeguarding Britain's credit rating one of his key pledges.
He has used maintaining the rating for government bonds as one of the main arguments for the Government's austerity programme.
The Chancellor insisted the Government was delivering on its commitment to tackle the UK's debt.
He said: "We have a stark reminder of the debt problems facing our country - and the clearest possible warning to anyone who thinks we can run away from dealing with those problems.
"We are not going to run away from our problems, we are going to overcome them."
He added: "In the end, the test of our credibility as a country is there every day in the markets when we borrow money on behalf of this country from investors all around the world.
"At the moment we can do that very cheaply with very low interest rates precisely because people have confidence that we have got a plan, we've got to stick to that plan and we are going to deliver that plan."
Labour's shadow chancellor Ed Balls told Sky News: "They (the Government) are paying the price for an absolute catastrophic failure of economic policy and everybody can see that now pretty much other than the chancellor and the prime minister.
"Until they face up to reality, we're just going to have more of the same."
Moody's said Britain's recovery was proving to be significantly slower than previous rebounds from recession and it did not expect the situation to change.
"(There's) increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years," it said.
Moody's is the first of the major credit rating agencies to knock the UK off of its top rating.
The ratings agency also cut the Bank of England's AAA rating by one notch, also to AA1. The US' top credit rating was downgraded by one notch in 2011.
Sky's Economics Editor Ed Conway said: "The fact that Britain has lost its AAA crown for the first time since credit ratings were given to the UK back in the 1970s, is a really big blow to Britain's reputation.
"It's something of an economic blow, but in a way it's more of a political problem for George Osborne. He made a key part of the Conservative election pledge to safeguard Britain's credit rating."
Moody's said that the British economy is constrained both by the troubled global economy and the drag from businesses and the Government slashing its debt burdens.
"Moreover, while the Government's recent Funding for Lending Scheme has the potential to support a surge in growth, Moody's believes the risks to the growth outlook remain skewed to the downside," it said.
Labour has insisted that withdrawing demand from the economy has put it more at risk by stunting growth.
Mr Balls 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.
"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."
what do you think?
These people don't help the more they say things are bad the less chance of anyone spending or investing
Nor do opposition politicians who would swear black is white if the felt they would get a vote from it It is time we started promoting the positives in this country not continually run it down
It is not the opposition parties that are running the country though Mick, Osborne's policies aren't working. Quantitative easing didn't work in Zimbabwe and it isn't working here, you never hear the gobsmiths attacking Mugabe these days, he appears to be their financial role model.
Why the thumbs down just that the bad press and scare mongering makes everyone reluctant to spend/invest one day they say things getting better then next it's this - its a mess and the governments done nothing to make things better its getting worse
Michael, the opposition is not running the economy. The coalition is running it. You can't keep going into history to find excuses for the present state of affairs. If you do , then don't be surprised if Thatcher gets a mention, as a response. The base reason why this country has been run into the ground by bankers. Did i say bankers, i meant w........
So all the cuts and austerity were made to we could keep this ridiculous rating. And now we don't have it ha ha ha ha. I want this government in jail.
How else does one reduce a debt but to spend less?
They are not spending less though luke, govt borrowing has gone UP every year, because if you make a load of people redundant and they cannot get another job, you have to pay them benefits, for which you get no return through things like income tax, less money spent in retail, so less vat on purchase`s, the shops go bankrupt = more people out of work = more benefits, less tax, less spent, its a vicious circle, America havent had austerity, cuts, tax hikes etc like us, and they`re not in the stew as much as us
Well maybe we should stop giving benefits to people who are not even in tbe EU! what is this country going to be like in 30 years time?
I seem to remember reading recently that Moody's were being accused of over rating a company carrying abnormal levels of debt - in America recently. So why bother with their views? Ignore them!
Seeds do not grow without food and water...
Great this will open the door to more cuts & austerity, what do we have to show for it?? 2 eejits that didn't even get elected in the 1st place that don't have a clue what there doing. We have seriously been led astray about this "road to recovery"
Gideon himself said keeping the AAA rating was the key economic fact to judge him by. He has failed. When's Gideon resigning?
its a reflection of conservative policy inept and incompetent
" Conservative policy " ? if they were conservative I`d vote for them. Globalisation, free immigration, easy on violent crime !! What is your idea of Liberalism ?
The only "stark reminder" here is just how bad a job this Chancellor is doing. If I did such a bad job I'd be sacked. This Govt needs to get its house in order and get the country going. Forget political pride and looking after the rich. Stimulate the economy and give people their lives back.
The lending scheme was a good idea to help promote growth and provide lenders with access to cheap money to lend particularly to first time buyers (ftb). I had a ftb with a £71k deposit refused a £65k mortgage and asked to come up with another £31k deposit to proceed. Lenders are frightened of falling foul of the Financial Services Authority affordability rules that have been imposed since the crisis began and still find it easier to decline to lend rather than risk an FSA fine.
please let me be in charge of the money only pay for two children all imigrants must prove they have money to keep themselves for two years all must speak english much more ???
Ive said that all along.It would be a lot worse if Liebore were still in.
Does only paying for two children include the recently redundant Blockbuster, HMV, Comet, Jessops etc employees? Do you tar all the unemployed with the same brush?
Don't mean a thing in today's world of global economic meltdown
The main points are they want people to spend money again but at work since December I been only doing basic 39 hours a week so without overtime I'm picking up over £300 less a month so my basic wage Just covers the bills. I haven't brought myself anything in years and when we need anything for the house or for our 7 month long daughther we bid for it on EBay or go car boots/table top sales. They really need to stop saying words like credit crunch and triple dip Recession as that ain't helping. It's not the workers fault that we In so much debt.
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Oh well, this is the just the start, looks like we're likely to end up the same as spain, portugal, greece and italy !!
Why don't we try the Ecuadorian model- tax the banks at an extra 2 percent and up public spending. They have got out of the economic stew a lot more quickly than we could hope to at present standing
Lets face it, things are bad,very bad. In my opin ion will get worse and for a long time. There is no reason why things should improve in the short to medium term without some sort of miracle. If the US loses its rating there is not much chance for any country in Europe keeping its rating. The rating agencies are really think tanks and nothing more. It was the rating agencies that told the banks that sub-prime mortgages were safe. if one wants to blame anybody for the mess we are in we must blame the regulators. Looking forward to Mervyn King going. How can we expand our trade when all our trading partners are experiencing a severe downturn.
You all forget, this was the company that gave AAA ratings to the American banks who caused all this trouble. They are just as bad as the rest of them.
God what a load of depressing gloom merchants you are! This country contains some of the most inventive, creative and brilliant brains in the world - just see our recent artistic and scientific successes. We also look after the poor, the needy, the not so needy, the scroungers, the wasters and the bone idle in a way that no other country does. Perhaps that is the way out. Stop being fairy godmother to the opportunist poor. Also some idiot who tried to convince us that we should take the Ecuadorian model. Two words poverty and corruption - learn a bit before you write!!
Can these credit rating agencies not have the power to downgrade incompetent chancellors ?