Downgraded finances

Bruce, UK

Thanks be for Gordon. Glad we are avoiding all that chaos.

john miller

Unfortunately, that seems to give Brown the green light for his scorched earth policy.

Cameron could try to play it that S&P have given up on the Labour "government" doing anything and are waiting for the Tories to get in and do something sensible.

Adam

This is exactly why we need a General Election now - we can't wait another year to set out detailed and sensible spending reduction plans.

johnny come lately.

No general election. Brown will organise a National Government consisting of his lot, Bercow as Speaker and the Lib Dems and the Ulster Unionists. They will pass emergency legislation extending this National Government for 6 years!

End of our democracy!

Fox in a box

If ever there were a cogent argument for the country requiring a general election, that has nothing to do with sleaze or party politics, then this is it. The men and women of this country need to have a say in how the country is being run because it is us who will suffer the reduction in living standards that Brown has secured for us.

oldtimer

It is a statement of the obvious, but important because it comes from S&P.

We should recall got its reputation badly burned last year for not downgrading certain financial institutions that were about to go belly up. It does not want to repeat the mistake. It should, therefore, be taken seriously.

John Malcolmson

The economic outlook for the UK is grim indeed unless, against all the odds, we get a government prepared to tackle the "elephant in the room" of welfare spending - currently £106 billion per year and rising.

Denis Cooper

We should find out more about the timing of our general election in about a month.

Irish Times, May 19th:

"Ireland's European partners have asked the Government to set a date for the second referendum on the Lisbon Treaty at next month’s EU leaders’ summit in Brussels."

If the Irish government plumped for a referendum in late September or early October, it's just possible that Merkel and Sarkozy would allow Brown to throw in the towel and call a general election in November.

But it's far more likely that the Irish government will choose a later date, which would prevent a general election being held here before next spring.

This is because Cameron has said that if the Lisbon Treaty has not already come into force when he becomes Prime Minister then he will put it to a British referendum, but on the other hand if the Lisbon Treaty has already come into force when he becomes Prime Minister then he will NOT put it to a British referendum.

Ergo, to forestall a British referendum which would almost certainly give the coup de grace to the Lisbon Treaty, Cameron simply cannot be allowed to become Prime Minister before the Irish have voted again, and (the eurocrats hope) the treaty has come into force.

That much has been bleedin' obvious since last autumn.

Dave

Could the Gurhka announcement have been made to give the gov good headlines to cover this story "a good day to bury bad news"

Denis Cooper

I'm surprised that anybody still pays much attention to what these rating agencies say, given their abject failure to correctly assess risks in recent years.

Jeremy

Reducing government borrowing, government debt and government expenditure are clearly going to be the central challenges for the next Conservative government. That, and re-introducing credibility and integrity to our economy. The success or failure of Cameron's administration will hinge upon these things - if, that is, he gets elected...

Raffles

I agree with Denis Cooper. I am afraid that generally the market has little patience or respect for the actions of S&P and the other ratings agencies. They have been so far behind the curve in the past 2 years it would be funny if it hadn't been so damaging. That said, sterling did take an initial tumble on this news and the ineptitude of S&P recently doesnt take away from the fact that the bare numbers of UK debt make shocking reading. Cameron has to act and surely he will have the mandate to do so. A failure to grasp the nettle immmediately could have genuinely serious repercussions. On the plus side, a serious and concerted move to put us back on the right path will be well received by the markets and whether we like it or not its the world markets that will be funding our debt for years to come. To finish on an upbeat note i can actually see us coming out of recession sooner than many commentators but our debt schedule longer term is the bigger picture.

Mark Harrison

Why is anyone taking S&P seriously after the way they have been guilty of not rating correctly for the last few years. Disgraceful that they even get column inches.

Verity

David Cameron is not the man. He is slavishly copying the wrecking ball of socialism to demonstrate what a good sport he is.

I am classifying him as the second most dangerous individual in British politics, after Gordon Brown. In fact, I may even move him up a place, because the people are on to Gordon Brown and he has no credence.

jim

S&P don't have a whole lot of credibility.
The government is issuing debt and the BoE (ie the government) is the main buyer.
That should tell you it is a house of cards, welcome hyper-inflation and mass poverty.

Gawain

This is very depressing news. The negative outlook will make it a little more difficult to raise money but the real worry is that any downgrade looks as if it will be deferred until after the election as it will depend on the next government's plans. In my view, Cameron and, above all, Osborne are going to have to drop the spin and clever dickery and level with the electorate. It would almost be better to lose the election having been brutally honest about the state of the economy and the extent of the cuts necessary if our children are going to have a worthwhile future at all. This is not 1979 where everyone was focussed on the unions and you could get away with being unspecific on the economy. The focus today is on the politicians and honesty is going to be the best policy.

Publius

Dennis Cooper.

"but on the other hand if the Lisbon Treaty has already come into force when he becomes Prime Minister then he will NOT put it to a British referendum."

When did he say this, or are you making it up?

Forlornehope

Interestingly the DAX and FTSE100 have been moving in lock-step for months until today. Now the DAX is up 1.6% and the FTSE100 is down 2.7%. The markets are taking this seriously.

Cameron is unlikely to say what he will do in advance of the election. Once in he can do the standard new CEO manouver and declare all the problems. "Sorry, but we had no idea that they had left this much of a mess so we will have to, etc."

Raffles

Verity, i hope you are wrong about "Dave". I am hoping he is doing a Blair to woo back the "caring" middle classes that got sucked in by that charlatan and once elected, he will do what has to be done. Having said that, given whats gone on in recent months this tactic is now irrelevant so maybe you are right and he reallly does want to be heir to Blair. What a dismal thought.

Wily Trout

I seem to remember reading that we were in a better position than several European countries and that the Euro would crash at some point - was that all just spin? My concern has nothing to do with my plans to book a trip to France in the autumn, nothing at all. I would never be so vile as to be wishing for such a thing just for my selfish ends.

Publius

I'm afraid that Verity is like a dog with an old bone on this heir to Blair riff. It was the right thing to say at the time, when far too many people thought Blair walked on water, and Brown was regarded by those same people with mild suspicion.

That was then, however.

I think I'm correct in saying he has not repeated the H to B thing for some time -- since, indeed, it ceased to have any useful political traction.

Surely it is obvious that not everything you say in politics encapsulates everything you mean. No effective politician forgets the importance of political rhetoric.

Raffles

Forlornehope, i am afraid your Dax stats were wrong. As i type the dax is down 2.64% and the ftse down 2.84% on the day. For the year you are closer although, allowing for currency the dax is up 1.77% and the ftse up 7.25%.

Lord Boyders

I have big issues with the fact that S&P gave positive ratings, which swayed the the whole banking comunity, for debt and mortgage instruments. They bare a massive responsibilty for the mess we are in today; now they threaten to downgrade us.

Nobody polices them and no one holds them to account.

Time for a good look at S&P please.

bill

This has grave implications for the bond market. Most pension funds and insurance companies are mandated to only purchase AAA paper in their income portfolios. Who will buy when they won't? And what will happen when they are all forced to sell their guilts, on the day of a dowwngrade? A decent pop in yields, and a rise in borrowing costs. Thats what

Edward

Verity - even as a "dog with an old bone" - you are spot on with your classification.

Denis Cooper - even though your canine credentials have not yet been challenged - I think you too have your eye on the ball.

British politics with the LabConLib party has successfully stifled UK government, which is not just in a state of paralysis, but is now well and truly comatose.
As George Osbourne, arguably the next Chancellor, happens to be a Bilderberger, I propose him as a contender for the title of the most dangerous man in UK politics.

Looks like the New World Order is still on schedule.

Hysteria

Raffles - Verity has been banging on this theme for a while. Like you I hope that DC is playing a long game and with a single bound he will turn into a conservative and set out the tough steps we need to take.

But I rather fear that Verity is right - my personal bet is there is a 80-90% chance that he is a Social Democrat in disguise.

Herbert Thornton

S & P may not be infallible - as some are pointing out - but they are right to be pessimistic about Britain. The extent to which so many people are in a state of denial over Britain's financial problems, and are still grasping at straws is astonishing. The deceptively named remedies of quantitative easing, of borrowing yet more money to allow continued extravagant expenditures, or as Fraser Nelson puts it, funding government with IOU notes now, with the Bank of England printing money to buy them - they all amount to one thing, inflation - and probably very severe inflation.

No matter what financial jargon is used to cover up the essential truth, it all amounts to thinking that it is possible to lift yourself up by pulling up on your bootstraps. It doesn't work - as the country will discover, even if David Cameron becomes the next Prime Minister. No matter what government is in office, there is no way to avoid a substantial fall in the general standard of living - which of course will be blamed on whatever government is in office.

Consider this - at the next General Election, David Cameron's party wins a very large majority. The small opposition consists of a more or less equal mix of Labour, UKIP, the Greens and the BNP. Can anybody imagine that Cameron has either the understanding or the will to enforce the thrift and other measures needed to cure the country's ills? More likely he will attempt to postpone the onset of widespread hardship by printing so much money that there is a Weimar rate of inflation accompanied by civil unrest, aggravated by Muslim extremism.

Then what? Civil war? A military coup? Military intervention from the continent? A sudden General Election with a desperate electorate finally turning to the BNP?

TGF UKIP

Gawain, I compliment you on a most perceptive post. Unfortunately I believe it will prove impossible for Cameron and Osborne to drop "the spin and clever dickery" so much is it part of their DNA.

For almost two years I have been banging on here, often in my wrangles with Tiberius, on Cameron's folly in continuing with his tax, spend and borrow policy stance. The contra argument has always been that not to do so "would frighten the horses" or "deluge the voters with doubt."

My view has always been, though, that so serious will be the problems and so onerous the debt that a prospective government intending to embark on a radical reduction of debt through cutting public expenditure on one hand and accelerating growth and income on the other via tax cutting, must have a mandate to do so.

The point I would also make over and over again is that while this would apply to any government it applies most specifically to a Conservative vote which will have ranked against it not just the Labour Party and the unions but the whole of the broadcasting media and a goodly slice of the Press as well.

Not enough to hint, not enough to creep up to the GE muttering about the extent of debt and seeing the books, the voting public need to be sold and educated on the extent of the problem and the scale of public sector spending and job cuts that will be required.

The battle for the support of the general public with Unison, the GMB, the CPSA and the rest of the gang must be joined now, not in Septemebr 2010. Then it will be too late and lost.

TomTom

Cameron will have to invite the IMF in to review Labour legacy