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.

Photo: Getty
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The Prevent strategy needs a rethink, not a rebrand

A bad policy by any other name is still a bad policy.

Yesterday the Home Affairs Select Committee published its report on radicalization in the UK. While the focus of the coverage has been on its claim that social media companies like Facebook, Twitter and YouTube are “consciously failing” to combat the promotion of terrorism and extremism, it also reported on Prevent. The report rightly engages with criticism of Prevent, acknowledging how it has affected the Muslim community and calling for it to become more transparent:

“The concerns about Prevent amongst the communities most affected by it must be addressed. Otherwise it will continue to be viewed with suspicion by many, and by some as “toxic”… The government must be more transparent about what it is doing on the Prevent strategy, including by publicising its engagement activities, and providing updates on outcomes, through an easily accessible online portal.”

While this acknowledgement is good news, it is hard to see how real change will occur. As I have written previously, as Prevent has become more entrenched in British society, it has also become more secretive. For example, in August 2013, I lodged FOI requests to designated Prevent priority areas, asking for the most up-to-date Prevent funding information, including what projects received funding and details of any project engaging specifically with far-right extremism. I lodged almost identical requests between 2008 and 2009, all of which were successful. All but one of the 2013 requests were denied.

This denial is significant. Before the 2011 review, the Prevent strategy distributed money to help local authorities fight violent extremism and in doing so identified priority areas based solely on demographics. Any local authority with a Muslim population of at least five per cent was automatically given Prevent funding. The 2011 review pledged to end this. It further promised to expand Prevent to include far-right extremism and stop its use in community cohesion projects. Through these FOI requests I was trying to find out whether or not the 2011 pledges had been met. But with the blanket denial of information, I was left in the dark.

It is telling that the report’s concerns with Prevent are not new and have in fact been highlighted in several reports by the same Home Affairs Select Committee, as well as numerous reports by NGOs. But nothing has changed. In fact, the only change proposed by the report is to give Prevent a new name: Engage. But the problem was never the name. Prevent relies on the premise that terrorism and extremism are inherently connected with Islam, and until this is changed, it will continue to be at best counter-productive, and at worst, deeply discriminatory.

In his evidence to the committee, David Anderson, the independent ombudsman of terrorism legislation, has called for an independent review of the Prevent strategy. This would be a start. However, more is required. What is needed is a radical new approach to counter-terrorism and counter-extremism, one that targets all forms of extremism and that does not stigmatise or stereotype those affected.

Such an approach has been pioneered in the Danish town of Aarhus. Faced with increased numbers of youngsters leaving Aarhus for Syria, police officers made it clear that those who had travelled to Syria were welcome to come home, where they would receive help with going back to school, finding a place to live and whatever else was necessary for them to find their way back to Danish society.  Known as the ‘Aarhus model’, this approach focuses on inclusion, mentorship and non-criminalisation. It is the opposite of Prevent, which has from its very start framed British Muslims as a particularly deviant suspect community.

We need to change the narrative of counter-terrorism in the UK, but a narrative is not changed by a new title. Just as a rose by any other name would smell as sweet, a bad policy by any other name is still a bad policy. While the Home Affairs Select Committee concern about Prevent is welcomed, real action is needed. This will involve actually engaging with the Muslim community, listening to their concerns and not dismissing them as misunderstandings. It will require serious investigation of the damages caused by new Prevent statutory duty, something which the report does acknowledge as a concern.  Finally, real action on Prevent in particular, but extremism in general, will require developing a wide-ranging counter-extremism strategy that directly engages with far-right extremism. This has been notably absent from today’s report, even though far-right extremism is on the rise. After all, far-right extremists make up half of all counter-radicalization referrals in Yorkshire, and 30 per cent of the caseload in the east Midlands.

It will also require changing the way we think about those who are radicalized. The Aarhus model proves that such a change is possible. Radicalization is indeed a real problem, one imagines it will be even more so considering the country’s flagship counter-radicalization strategy remains problematic and ineffective. In the end, Prevent may be renamed a thousand times, but unless real effort is put in actually changing the strategy, it will remain toxic. 

Dr Maria Norris works at London School of Economics and Political Science. She tweets as @MariaWNorris.