A ‘Downgraded’ Chancellor? AAA Downgrade Discussed in Emergency Question

As of Friday, the first of the big two international credit companies, Moody’s, has downgraded Britain’s AAA credit rating to AA1, a huge blow for Britain’s economy. Labours Ed Balls predictably points the finger straight at the Tory party with particular condemnation of those actions set to pass by the hand of George Osborne.  

Monday’s emergency question on Moody’s downgrade provoked further finger pointing, increasing division in attitudes towards the deficit program. While Osborne still stands firmly by this program, many of the opposition have lost complete confidence in the scheme that couldn’t even safeguard Britain’s credit rating, a promise that had been made in 2010 by the Tory party.

He used to say a downgrade would be a disaster, today he says this downgrade doesn’t matter – but he is still warning a further downgrade really would be a disaster,” Ed Balls’ attempt to undermine Osborne just bought the response that Tories inherited their deficit problems from Labour.

While both contest their points, Osborne’s approach to the latest setback to the economy appears to be less damaging than if the government continued under Labour. As it would have been likely that Britain would have seen a downgrade much sooner with their policy of high borrowing and spending.

Osborne will continue with deficit plan despite downgrade

Yannick Naud, who invests in government bonds at Glendevon King Asset Management, found it a surprise that Britain was not downgraded sooner, due to continued slow growth in the economy, ‘the UK should not have been rated AAA anyway.

Following the antics of the emergency question, what does this really mean for Britain’s economy?

The likelihood is that Standard & Poor, usually a more critical credit rating agency, will follow suit after Moody’s downgrading. The high rating Britain had was one of Osborne’s endorsements for the deficit program, without this there is increased calls from Labour to follow Ed Balls’ plan to borrow more.

Though the downgrade is a blow to Britain’s economy and could deter future investors from investing within Britain with the result of slowing down recovery further. It does not mean recovery is impossible but it will take an extensive amount of time for Britain to regain the prestige of AAA credit rating.

Ashleigh McLeod

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