Labour's plan would have cost us our AAA rating
Peter Hoskin 8:21am
For Ed Balls this morning, there is only one conclusion to be drawn from the news about our credit rating: ‘A change of course is needed.’ But to what?
Balls no doubt means a shallower course of deficit reduction — less far, less fast. But Moody's are clear that we have been placed on a negative outlook because of doubts that our
fiscal consolidation will continue strongly enough. Specifically, they say that, ‘Any further abrupt economic or fiscal deterioration would put into question the government's ability to place
the debt burden on a downward trajectory by fiscal year 2015-16.’
So how would Labour have fared? We already know that they didn't propose to put debt on a downwards trajectory back then (see my post here). But it would have been even worse in reality. In
their recent Green Budget, the IFS actually put Alistair Darling's plan through their calculators, and accounted for the economic
situation since. This is what they came up with:
Which is to say, even more borrowing — and even more debt. As I said in an quick update to my post last night, ‘Labour plans would probably have lost us our AAA rating already.’‘All things considered, it seems likely that, in the absence of the additional fiscal tightening announced since the general election, borrowing would have been on course to be closer to £76 billion in 2016–17 than to the £26 billion that was forecast in the March 2010 Budget.’
Of course, Labour will argue that their plan for slower deficit reduction would have boosted growth, which would have improved the debt position, which would have pleased the credit rating agencies, etc, etc. But it's worth remembering that, before the election, S&P justified keeping us on negative watch, and warned that we could lose our AAA rating, precisely because the Darling Plan didn't put debt on a downwards trajectory. ‘Additional spending measures will likely be required to put the public debt burden on a clear downward trajectory later in the current decade,’ is how they put it then. And that was when growth forecasts were much more optimistic than they are now.
Labour might, and probably would have, changed their plans had they won the election. But this is the point: when Balls talks about a ‘change of course’, he's disregarding the fact that Labour would probably have had to change their course too. Anything other than faster and further would surely have had the credit rating agencies swooping.
Or, of course, they could have just ignored the credit rating agencies — but that's not what they're saying George Osborne should do this morning.
Previous
toco
February 14th, 2012 9:13am Report this commentGiven Balls' very close association with the 'Smeargate' trio of Damian McBride,Dolly Draper and Charlie Whelan why should we believe anything this odious person has to say.
Widmerpool
February 14th, 2012 9:22am Report this commentPete
Very well said if I may say so the Electorate's memories can be very short and they need constantly reminding what the Labour Treasury team Brown,Balls and Miliband did to the economy and more importantly what Balls weanted to do if they had got back!
Ostrich (occasionally)
February 14th, 2012 9:49am Report this commentJust hearing Komnccap Balls on 'Today' this morning fills one with fear. Can it really be that someone who so misunderstands the message of Moodys' downgrading holds the job of shadow Chancellor?
Sir Everard Digby
February 14th, 2012 10:18am Report this commentSo,let me get this straight;the man who supported the plans which would send us to oblivion and who continued to support them until recently, is recommending a slower approach to the abyss? And he is being treated as some form of economic guru?
The man is a clever member of the political classes -in the real world that equates to a fantasist or an idiot,or both.
We can now see that the lunatics are in charge of a runaway train which they claim to control -in reality nothing could be further from the truth.Worse still,they continue to stoke the boiler,just like the last lot.
Slim Jim
February 14th, 2012 10:26am Report this commentI listened to that nasty, vicious individual talking Balls on the Today programme this morning. It is quite clear that he would make an even bigger mess of the economy than it is in now. It is obvious that the lunatics are in charge of the asylum. The question is: who the bloody hell do we vote for? They're all out of their depth, and they're taking us down with them.
Sylva
February 14th, 2012 10:30am Report this commentOh another blame game from right whingers who can not accept their failures.
Colossal failure from these buffoons and they will carry the blame.
I am sure the mild winter also contributed in the credit rating signal.
What a shame
tb
February 14th, 2012 10:56am Report this commentI'm still amazed that anybody actually thinks Balls has experience to comment on financial matters.
Pettros
February 14th, 2012 11:25am Report this commentWidmerpool -
I disagree people do have long memories. Thats why the Tories will never win an outright majority again...ever.
Silvio
February 14th, 2012 11:38am Report this commentOh another blame game from right-on Labour whingers who can not accept their failures.
Colossal failure from these buffoons and they carry the blame.
I am sure the (insert anything here)also contributed in the credit rating signal.
What a shame that Balls is given airtime.
2trueblue
February 14th, 2012 11:46am Report this commentThe spending spree conducted by the last government in its dying days speaks volumes, and Byrnes note saying there was no money left consolidates their attitude to the economy. It wasn't their money so they didn't care, so how Balls is given any air time beggars belief. Blairs government inherited a very healthy financial situation and went about wrecking it and not unusually take no responsibility for doing so.
Ostrich (occasionally)
February 14th, 2012 1:28pm Report this commentPettros 14th, 11:25am
On your planet, do the two suns combine to give the sky a soft, green colour?
Alex
February 14th, 2012 2:41pm Report this commentYour comment is a little one-sided. Sure, Labour's spending plans may have led to higher borrowing, but higher borrowing per se is not the problem if it leads to increased economic activity , which in turn leads to an increased ability to service the debt.
Balls' failure is that he doesn't ever explain how his spending will lead to a stronger economy with higher revenues, and we conclude that his only plan is to spend the extra borrowing on his Labour clients so they can fritter it on Chinese-made iPads and Nike trainers.
Vacant Possession
February 14th, 2012 9:51pm Report this commentWhat? What do you think the conservatives are going to achieve?
We don't need conservatism, we need a more radical approach encouraging people to work, low taxes, attempts to forge alliances with others than Europe without bribing them with 'charity', personal responsibility for actions, immigration we need not unfettered, less bureaucracy, less helping our burning neighbours by pouring petrol on them (more debt), changes such that British Law comes before anyone else, more independance. Are you surprised Scotland would like independance from the UK? Who can blame them.
You aren't going to get that from Cleggeron and labour should never be trusted again.
Lets look to the independants and hope some of the good 'for the British People' politicians seize the moment and form a party with clear ambitions to re-assert us the nimble cost effective ingenious people we are to bring back pride, affluence, employment to the UK. We need R&D, cheap independant energy which works when the wind doesn't blow, low corporation tax so people want to base their operations here. That;s the kind of positive feedback we need, the lower the taxes the greater the income as more invest and more employ.
That's opposed to the positive feedback you get when you borrow more, tax more, get other people to rule you. Unsurprisingly that leads you all to poverty, no jobs, state dependance. Lord help us, I know which of those options Cleggeron will follow.
Downtown
February 18th, 2012 11:15pm Report this commentLabour commenting on economic competence? You have got to be joking. Both times they have been in Government in the last 30 years they have almost bankrupted the country. No amount of ineffectual ideological attempts to blame others can hide that fact.
No matter how many times you repeat it, you can't borrow your way out of debt.
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