Why we should hope the UK loses its AAA rating

It would expose the myth that the market punishes higher borrowing.

As a drowning man clings to a life raft, so George Osborne clings to the UK's AAA credit rating as proof of his "credibility". When Standard & Poor's reaffirmed the UK's top rating last month, Osborne declared: "this is a reminder that despite the economic problems we face, the world has confidence that we are dealing with them".

But with the Chancellor now likely to break his golden debt rule, it's possible and even probable that at least one agency (Moody's and Fitch currently have the UK on "negative outlook") will remove our AAA rating in the near future. If Osborne is to be believed, this would be a disastrous blow to our economic credibility. But, as so often with the Chancellor, there's no evidence for this claim. The US, for instance, has seen no rise in its borrowing costs since losing its AAA rating a year ago today, indeed, its rates have fallen. All the evidence we have suggests that the market is prepared to lend to countries that can borrow in their own currencies, such as the US, the UK and Japan, and that enjoy the benefits of an independent monetary policy, regardless of their credit ratings or their debt levels (Japan's national debt is 211 per cent of GDP, while ours is 66 per cent, a reminder that we were never on the "brink of bankruptcy").

Now, as PoliticsHome points out, Danny Alexander has hinted that he knows as much. The Chief Secretary to the Treasury told the BBC:

The credit rating is not the be-all and end-all.

What matters is have we got the right policy mix for the country to get people back into work, to support economic growth, to deal with the huge problems in our public finances and the credit agencies reflect on those things and the ratings they give are a reflection of the credibility of that mix.

In fact, one could go further than Alexander and argue that the loss of our AAA rating would be a positive development. It would explode the myth that borrowing for growth (in the form of tax cuts and higher public spending) would lead to a bond market revolt and would strengthen the cause of those who argue that we shouldn't allow the agencies that rated Lehman Brothers as "safe", days before it filed for bankruptcy, to dictate our economic policy. It would also, of course, be a lethal blow to the political credibility of the current occupant of the Treasury. Osborne's deficit reduction plan was rooted in the need to preserve our AAA rating. If he fails in this task, why should voters trust him to do anything else?

Yet the loss of our AAA rating would finally liberate Osborne to pursue a plan that actually works. Once the belief that the market holds a veto on our borrowing levels is exposed as a myth, the Chancellor could finally stimulate growth through tax cuts and higher public spending. A growing economy could revive his reputation and that of his party. The path to redemption is open to Osborne. Unfortunately for the Tories, there is almost no chance of him taking it.

Chancellor George Osborne and Culture Secretary Jeremy Hunt watch the track cycling at the Olympics. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

0800 7318496