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.