The pressure's on Osborne
Fraser Nelson 10:26am
The Times tempted fate today with its splash boasting about the confidence and the strong pound. Fitch Ratings has today said that Britain’s AAA debt rating is more at risk than that of any other major nation because it needs “the largest budget adjustment” - ie, the most cuts - because Britain has the largest fiscal mess, and by some margin. (Sterling is off today on the news).
But then Fitch says, more or less, that it’s banking on George Osborne’s first budget to sort the mess out. “Our stable rating outlook reflected our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year.” The Conservatives should be proud of that verdict, but also anxious. They have been talking to the debt rating agencies (Fitch, S&P etc) and given them informal indications of how much they would cut the deficit by. I suspect that these agencies have been given more detail than the public has (or the rest of the Shadow Cabinet for that matter). If Osborne falls short of their expectations, then a big downgrade will follow his budget. So yes, Osborne may well be keeping Britain’s AAA rating safe. But that means it’s his to lose.
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maas101
November 10th, 2009 10:45am Report this commentIt's unfortunate that it isn't more widely publicised that the only reason Britain has such a good rating is the expectation of a Conservative government.
It would be a final nail in the coffin of Brown's so called economic competence (not that there aren't quite a few nails in there already!).
General Zod
November 10th, 2009 11:09am Report this commentWhere's the story here? It's obvious that the AAA rating will be Osborne's to lose, but where Brown did his absolute best to lose it, Osborne will be doing his best to retain it. We've known for months that the only reason the agencies haven't actually downgraded the UK is that they expect Labout to be out of power next summer.
Roger Davies
November 10th, 2009 11:36am Report this commentWhat must Osborn promise?
Short the UK
November 10th, 2009 11:38am Report this commentFraser,
The fork in the road will be 2010. Does the UK go Japanese (low interest rates "shallow depression") or Argentinian (high interest rates "heavy depression").
The political elite will determine the road we take. There will be nowhere to hide. Such is our broken balance sheet.
I am still waiting for our elite to apologise.....
2trueblue
November 10th, 2009 1:12pm Report this commentWe don't yet know what the true depth of Browns mess. And we know that Labour are involved in a scorched earth policy. Lets hope that Osbourne/Cameron can get as much information as possible and nail it on Labour.
Ian Walker
November 10th, 2009 3:58pm Report this comment@Short The UK: it's widely recognised the the Japanses approach was a disaster, because a "shallow" depression is pretty much by definition a "long" one too, and while your economy is down for a long time, the rest of the world moves past.
The difficulty with the "short sharp shock" approach is making sure that the blame for the pain is placed squarely on Brown and Co, which is exactly why it shoudl be done straight after the election, while the fickle public can still make the connection.
Make the cuts deep enough and quick enough, and you can start to have genuine recovery before the next election is due, giving you a superb narrative to win a second term and go on to a progressive agenda with a budget surplus.
Short the UK
November 10th, 2009 5:56pm Report this commentIan,
I totally agree with you.
I think it will take 3 to 10 years to re-engineer the economy. Keeping interest rates low is the key to doing this. Hence my Japanese analogy.
The sooner we cut the cloth of the Public Sector the better, we need the capital to go to the Private Sector. The soft-left will blame it all on the Tories, even though they were the people who destroyed the balance sheet.
Pretty depressing situation.
If the political class don't get their act together we go Argentinian.
The Three Little Pigs
November 10th, 2009 11:08pm Report this commentThe Tories need a men-from-the-IMF moment to register Labour's financial incompetence in the mind of the elecorate for a generation.
The present stimulus induced reprieve, timed as it is to coincide with the GE, defers the pain. Osborne's plan might be to over promise and then quickly under deliver, letting the rating agencies trigger the event to prove Labour's incompetence, re-calculate the scale of the debt and validate unattractive remedies.
DavidL
November 11th, 2009 7:28am Report this commentJust another example that the change of power has already happened. Even when this Government tries belatedly to announce a policy such as nuclear power this week the media (rightly) focus on whether the Tories intend to carry it through or not.
chaz1
November 11th, 2009 4:51pm Report this commentHave you seen the piece in the FT where Fitch say the implication drawn in this blog entry are not true?
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