Fitch agency downgrades UK credit rating from AAA to AA+

More trouble for "downgraded Chancellor" George Osborne.

The Fitch agency has joined Moody's in downgrading Britain's credit rating, citing a "weaker economic and fiscal outlook".

The country has moved from AAA, the top rating, to AA+. However, Fitch says that outlook is now "stable" meaning that Britain is unlikely to be downgraded further. (The third agency, Standard & Poor's, still gives Britain a triple-A score.)

As Staggers editor George Eaton noted when Moody's downgraded Britain, George Osborne repeatedly staked his economic credibility of the views of the ratings agencies when the coalition came to power. He wrote:

For Osborne, who chose to make our credit rating the ultimate metric of economic stability, it is a humiliating moment. Not my words, but his. During one of his rhetorical assaults against Labour in August 2009, he warned: "Britain faces the humiliating possibility of losing its international credit rating". Rarely before or after becoming Chancellor, did Osborne miss an opportunity to remind us just how important he thought the retention of our AAA rating was.

The Treasury responded to the news by reaffirming its commitment to austerity in the name of deficit reduction. A spokesperson told the BBC:

"This is a stark reminder that the UK cannot simply run away from its problems, or refuse to deal with a legacy of debt built up over a decade.

"Fitch themselves say the government's 'continued policy commitment to reducing the underlying budget deficit' is one of the main reasons UK debt now has a 'stable' outlook.

"Though it is taking time, we are fixing this country's economic problems. The deficit is down by a third (since 2010), a million and a quarter new private sector jobs have been created and the credibility we have earned means households and businesses are benefitting from near record low interest rates."

However, as the New Statesman's economics editor - and former member of the Bank of England's Monetary Policy committee - David Blanchflower wrote in March:

Our downgraded Chancellor lost the UK’s triple-A credit rating because he has delivered neither on growth nor on the deficit. In June 2010, the Office for Budget Responsibility (OBR) forecast that growth in the UK would be 2.3 per cent in 2011 and 2.8 per cent in 2012. What we got was 0.9 per cent and -0.1 per cent.

The government hasn’t dealt with the country’s debts – far from it. The coalition has boasted so many times that it has reduced the deficit by a quarter but the reality is that this was done primarily by slashing capital spending, which has had a devastating impact on the construction industry. And the deficit is now rising, as was confirmed in the 20 March Budget.

George Osborne stares at a wheel. Photo: Getty

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

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The clever ideological trick that could save the Labour party

The Co-operative party could suddenly get a lot more popular. 

It’s do or die for the party’s moderate MPs, who have lost the fight for the soul of Labour and must quickly move on. 

The 172 Labour MPs who backed a no-confidence vote in Jeremy Corbyn earlier this year may not like their newly elected party leader much, but they loathe John McDonnell. 

So it is little surprise that one of them, John Woodcock, reportedly looked “sick to the stomach” when the Shadow Chancellor tenderly invited him for a cuppa in his office following the leadership election result at conference. Reading the tea leaves tells me those talks aren’t going to go well.  

Yet moderate MPs would do well to revisit McDonnell’s off-the-cuff comments from a few years back: “I’m not in the Labour party because I’m a believer of the Labour party as some supreme body or something God-given or anything like that,” he told a small audience in 2012. “It’s a tactic. It’s as simple as that. If it’s no longer a useful vehicle, move on.” 

Two feather-spitting former frontbenchers called for McDonnell’s resignation when these comments emerged in March, saying they revealed his Trotskyist tendencies. "The context (a hard-left gathering) and the company (which included Gerry Downing, expelled from Labour for his comments on 9/11) didn’t make for great publicity, no," a Leader’s Office staffer privately confesses. 

But McDonnell is right: There is nothing necessary, natural or divinely ordained about Labour’s existence lest it can get things done. Which is why the parliamentary Labour party cannot botch its next attempt at power. 

In the wake of Corbyn’s re-election, Labour MPs face a fork-in-the-road: fight this civil war until its bitter end - play the long game, wait until Labour loses the next general election and challenge Corbyn again - or start afresh. 

It is a bleak, binary choice, akin to a doctor delivering test results and declaring the illness is terminal as feared: the patient can go down fighting and die a slow death, notwithstanding a medical miracle, or instead take part in a pioneering new drug trial. This carries the risk of dying immediately but promises the possibility of life as well. Both options are fraught with danger.

The problem with the first option is that moderates have all but lost the party already. A poll reveals Corbyn won 85 per cent - 15 per cent among members who joined after he became party leader and lost 37 per cent - 63 per cent among those who were members of the party before the last general election. The result: victory by 119,000 votes. 

Corbyn has already announced he wants to give these foot soldiers far greater firepower and told Andrew Marr he had asked the NEC to draft plans for increasing the membership and including it in “all aspects of party decision making”. Labour is transitioning apace into a social movement: free of formal hierarchy and ambivalent about parliamentary power. 

So why wait until 2020? There is every chance that MPs won’t any longer have the power to challenge to Corbyn within four years’ time. If Momentum has its way with reselection and shadow cabinet elections, leading rebels may not be around to begin with. 

Even if MPs mount another leadership challenge, few believe organisations like Saving Labour or Labour First could put together a sizeable enough electorate to outgun Corbyn at the ballot box. He would be voted back in by a landslide. 

The alternative is for MPs to create a new centre-left force. The main plan under consideration is to join the Cooperative party, Labour’s sister party, and sit as a bloc of “double hatted” MPs, with their own policy agenda on Brexit and the economy. This new bloc would apply to the Speaker to become the official opposition. 

Plenty of MPs and members recoil at the idea of a semi-split like this because of the mixed message it would send to voters on the doorstep. "So you don’t have faith in Corbyn, but you’re a Co-op MP campaigning on behalf of his Labour?" Many believe a full-split would be worse. They fear being pitted against Corbyn-backed Labour candidates in local constituencies and splitting the left vote, opening the door to Ukip or the Conservatives in marginal seats. 

But if moderate MPs mean what they say when they warn of total electoral wipeout in 2020, risking a new centre-left grouping is intuitively worth it.  What do they have to lose? And how many more times can Labour’s moderates cry wolf - Labour "risks extinction", Sadiq Khan said yesterday - until voters call their bluff and tell them to quit complaining and fall in line behind their leader? 

While Corbyn’s polling remains disastrous, a Co-op/Labour party would boast a mandate of 9.3m people, a policy agenda in line with Britain’s political centre of gravity and a chance of becoming the official opposition: a risk worth taking in the face of electoral oblivion. 

A handful of battle-bruised MPs are talking about coming together. "Time to unite," a deflated Hilary Benn tweeted this weekend. There is a precedent for this: first past the post means the party has always been composed of uneasy coalitions of different groups - take the trade unionists, liberal cosmopolites and ethnic minorities of the New Labour years - and it is arguably no different now.  

Yet this is not about a coalition of diverse interests. It is about two parties within a party, each of which believes Labour is their rightful inheritance. Of the two, moderates are least likely to gain anything by engaging in an all out war. It is time they took a leaf out of McDonnell’s book and accepted it is time, regrettably, "to move on". 

Gabriel Pogrund is a journalist at The Sunday Times and a Google News Fellow 2016.