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.

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Commons Confidential: Dave's picnic with Dacre

Revenge is a dish best served cold from a wicker hamper.

Sulking David Cameron can’t forgive the Daily Mail editor, Paul Dacre, for his role in his downfall. The unrelenting hostility of the self-appointed voice of Middle England to the Remain cause felt pivotal to the defeat. So, what a glorious coincidence it was that they found themselves picnicking a couple of motors apart before England beat Scotland at Twickenham. My snout recalled Cameron studiously peering in the opposite direction. On Dacre’s face was the smile of an assassin. Revenge is a dish best served cold from a wicker hamper.

The good news is that since Jeremy Corbyn let Theresa May off the Budget hook at Prime Minister’s Questions, most of his MPs no longer hate him. The bad news is that many now openly express their pity. It is whispered that Corbyn’s office made it clear that he didn’t wish to sit next to Tony Blair at the unveiling of the Iraq and Afghanistan war memorial in London. His desire for distance was probably reciprocated, as Comrade Corbyn wanted Brigadier Blair to be charged with war crimes. Fighting old battles is easier than beating the Tories.

Brexit is a ticket to travel. The Independent Parliamentary Standards Authority is lifting its three-trip cap on funded journeys to Europe for MPs. The idea of paying for as many cross-Channel visits as a politician can enjoy reminds me of Denis MacShane. Under the old limits, he ended up in the clink for fiddling accounts to fund his Continental missionary work. If the new rule was applied retrospectively, perhaps the former Labour minister should be entitled to get his seat back and compensation?

The word in Ukip is that Paul Nuttall, OBE VC KG – the ridiculed former Premier League professional footballer and England 1966 World Cup winner – has cold feet after his Stoke mauling about standing in a by-election in Leigh (assuming that Andy Burnham is elected mayor of Greater Manchester in May). The electorate already knows his Walter Mitty act too well.

A senior Labour MP, who demanded anonymity, revealed that she had received a letter after Leicester’s Keith Vaz paid men to entertain him. Vaz had posed as Jim the washing machine man. Why, asked the complainant, wasn’t this second job listed in the register of members’ interests? She’s avoiding writing a reply.

Years ago, this column unearthed and ridiculed the early journalism of George Osborne, who must be the least qualified newspaper editor in history. The cabinet lackey Ben “Selwyn” Gummer’s feeble intervention in the Osborne debate has put him on our radar. We are now watching him and will be reporting back. My snouts are already unearthing interesting information.

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution