The Osborne tight walk: Credit rating agency issues frosty report
By Ian Dunt and Oliver Hotham
George Osborne faced the prospect of losing Britain's AAA credit rating today, after a gloomy report from one of the agencies sent shivers through Downing Street.
The report, from Moodys, concluded there was a 30% chance Britain loses its AAA credit rating in the next 18 months.
"It was a reality check for the whole political system that Britain has to deal with its debts, that we can't waver in the path of dealing with our debts," Mr Osborne said.
"It's yet another reminder that Britain doesn't have an easy way out of its economic problems. Of course the weaker growth prospects of Britain and just about every other economy is a challenge.
"People have a choice about where to put their money. If they don’t see Britain dealing with its problems, they will take their money elsewhere."
In a sign of how pivotal credit ratings have become to the coalition's economic project, Labour also claimed to have its agenda vindicated by the report.
"This is a significant warning to a chancellor who himself made balancing the books by 2015 and the views of the credit rating agencies the key benchmarks for the success of his economic policy," said shadow chancellor Ed Balls.
"Moody’s is clear in its statement that the primary reason for Britain’s negative outlook is ‘weaker growth prospects’ which are making it harder to get the deficit down."
The credit rating agency said: "The primary driver underlying Moody's decision to change the outlook on the UK's AAA rating to negative is the weaker macroeconomic environment, which will challenge the government's efforts to place its debt burden on a downward trajectory over the coming years."
Mr Osborne has banked much of his political reputation on the continuing trust of credit rating agencies, with ministers regularly reminding the public of the increased cost of servicing the debt should the rating be downgraded.
With the UK possibly already back in recession, the chancellor will be severely damaged by any downgrading of the country's rating.
