The condensed Moody's downgrade

What does the rating agency say about Britain?

The Moody's credit rating agency downgraded Britain yesterday. It's important to note that ratings agencies "quite simply don't understand what they themselves are saying", that they aren't very good at rating credit, and that no-one actually cares if a country's rating does get cut — but with all of that in mind, what does Moody's actually say about Britain?

The agency's own summary gives three interrelated reasons for the downgrade:

  1. The continuing weakness in the UK's medium-term growth outlook, with a period of sluggish growth which Moody's now expects will extend into the second half of the decade;
  2. The challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation programme, which will now extend well into the next parliament;
  3. And, as a consequence of the UK's high and rising debt burden, a deterioration in the shock-absorption capacity of the government's balance sheet, which is unlikely to reverse before 2016.

That is, we aren't growing, that growth is harming our ability to deal with the deficit, and that deficit means we're less likely to be able to deal with any other nastiness the global economic climate throws at us.

Expanding on the first of those, Moody's says:

Despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy from the ongoing domestic public- and private-sector deleveraging process.

Moody's also slams the Chancellor for his "smash and grab raid" on the Bank of England's QE funds, saying that:

Moody's now expects that the UK's gross general government debt level will peak at just over 96% of GDP in 2016. The rating agency says that it would have expected it to peak at a higher level if the government had not reduced its debt stock by transferring funds from the Asset Purchase Facility which will equal to roughly 3.7% of GDP in total as announced in November 2012.

The agency is clear, though, that the failure to cut the deficit comes from a lack of growth, not a lack of commitment. In other words, Osborne's plan was always likely to be self-defeating:

More specifically, projected tax revenue increases have been difficult to achieve in the UK due to the challenging economic environment. As a result, the weaker economic outturn has substantially slowed the anticipated pace of deficit and debt-to-GDP reduction, and is likely to continue to do so over the medium term.

And so, Moody's says, with too much debt we won't be able to deal with another recession:

Moody's believes that the mounting debt levels in a low-growth environment have impaired the sovereign's ability to contain and quickly reverse the impact of adverse economic or financial shocks. For example, given the pace of deficit and debt reduction that Moody's has observed since 2010, there is a risk that the UK government may not be able to reverse the debt trajectory before the next economic shock or cyclical downturn in the economy.

These words will be dissected over the next few days, as every political actor tries to read into them what they want. Some will focus on the fact that Moody's analysis starts with poor growth as the basic factor for Osborne's failure. Others will note that Moody's is still a firm advocate of high-speed deficit reduction.

Still others, myself included, will argue that, apart from the fact that the Chancellor has been hoist by his own petard, all the news really does is prove yet again that ratings agencies aren't very good at their jobs. Moody's recognises that Britain's economic travails stem from depressed growth, but its analysis seems incapable of progressing on from there. Taken as a whole, the agency is saying, with a straight face, that "Britain's attempts to cut its debt have harmed its attempts to cut its debt, and this could harm its attempts to cut its debt", and it sees nothing problematic with that.

Really, nothing in Moody's analysis matters. The only important part of it is that one missing A, and the effect that has on Osborne's credibility.

Moody's. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Inside the progressive alliance that beat Zac Goldsmith in Richmond

Frantic phone calls, hundreds of volunteers, and Labour MPs constrained by their party. 

Politics for a progressive has been gloomy for a long time. On Thursday, in Richmond Park of all places, there was a ray of light. Progressive parties (at least some of them) and ordinary voters combined to beat Ukip, the Tories and their "hard Brexit, soft racist" candidate.

It didn’t happen by accident. Let's be clear, the Liberal Democrats do by-elections really well. Their activists flood in, and good luck to them. But Richmond Park was too big a mountain for even their focused efforts. No, the narrow win was also down to the fast growing idea of a progressive alliance. 

The progressive alliance is both a defensive and offensive move. It recognises the tactical weakness of progressives under first past the post – a system the Tories and their press know how to game. With progressive forces spilt between Labour, Liberal Democrats, Greens, the SNP, Plaid Cymru, the Women’s Equality Party and more – there is no choice but to co-operate, bring in proportional representation and then a whole new political world begins.

This move opens up the wider strategy – to end the domination of the City, and right-wing newspapers like the Mail, so Britain can have a real debate and make real choices about what sort of economy and society it wants. A pipedream? Well, maybe. But last night the fuse was lit in Richmond Park. The progressive alliance can work.

Months before the by-election, the pressure group for a progressive alliance that I chair, Compass, the Greens, and some Labour, Liberal Democrat and SNP MPs and activists, began considering this. The alternative after Brexit was staring into the void.

Then the Tory MP Zac Goldsmith stepped down over Heathrow. To be fair, he had pledged to do this, and we should have been better prepared. In the event, urgent behind-the-scenes calls were made between the Greens and the Liberal Democrats. Compass acted as the safe house. The Greens, wonderfully, clung onto democracy – the local party had to decide. And they decided to stand up for a new politics. Andree Frieze would have been the Green candidate, and enjoyed her moment in the autumn sun. She and her party turned it down for a greater good. So did the Women’s Equality Party.

Meanwhile, what about Labour? Last time, they came a distant third. Again the phones were hit and meetings held. There was growing support not to stand. But what would they get back from the Liberal Democrats, and what did the rules say about not standing? It was getting close to the wire. I spent an hour after midnight, in the freezing cold of Aberdeen, on the phone to a sympathetic Labour MP trying to work out what the party rule book said before the selection meeting.

At the meeting, I am told, a move was made from the floor not to select. The London regional official ruled it out of order and said a candidate would be imposed if they didn’t select. Some members walked out at this point. Where was the new kinder, gentler politics? Where was membership democracy? Fast forward to last night, and the Labour candidate got less votes than the party has members.

The idea of a progressive alliance in Richmond was then cemented in a draughty church hall on the first Tuesday of the campaign – the Unitarian Church of course. Within 48 hours notice, 200 local activist of all parties and none had come together to hear the case for a progressive alliance. Both the Greens and Compass produced literature to make the case for voting for the best-placed progressive candidate. The Liberal Democrats wove their by-election magic. And together we won.

It’s a small victory – but it shows what is possible. Labour is going to have to think very hard whether it wants to stay outside of this, when so many MPs and members see it as common sense. The lurch to the right has to be stopped – a progressive alliance, in which Labour is the biggest tent in the campsite, is the only hope.

In the New Year, the Progressive Alliance will be officially launched with a steering committee, website and activists tool-kit. There will also be a trained by-election hit squad, manifestos of ideas and alliances build locally and across civil society.

There are lots of problems that lie ahead - Labour tribalism, the 52 per cent versus the 48 per cent, Scottish independence and the rest. But there were lots of problems in Richmond Park, and we overcame them. And you know, working together felt good – it felt like the future. The Tories, Ukip and Arron Banks want a different future – a regressive alliance. We have to do better than them. On Thursday, we showed we could.

Could the progressive alliance be the start of the new politics we have all hoped for?

Neal Lawson is the Chair of Compass, the pressure group for the progressive alliance.

Neal Lawson is chair of the pressure group Compass, which brings together progressives from all parties and none. His views on internal Labour matters are personal ones.