Saturday, February 23, 2013

Losing Our AAA Credit Rating

Just agreed to join the cast of Radio Wales Sunday Supplement tomorrow morning to discuss the downgrading of the UK's Aaa credit rating by Moody's earlier this week.  Also 'appearing' on Radio Cymru's Bwrw Golwg to discuss 'militarisation' of foreign aid budget. Great for me - getting straight back into big serious issues after a few days reading thrillers and playing a bit of golf in the sun. Have to get my thoughts in order.

At one level the credit rating downgrade is of very little consequence. Its been factored into the market for months. There can hardly have been an economist who didn't expect the downgrade. Many had expected it sooner. Some Treasury 'body language' had suggested to me months ago that this was almost inevitable. What matters of course is the interest rates the UK has to pay in the bond markets, and the downgrade is unlikely to have any effect on that. What matters is whether the markets have confidence in the UK's ability to come through the economic turmoil that's hitting most developed countries. I suspect the value of sterling early next week will concern the Chancellor more.

But in my world of politics, symbolism matters. Since before the last General Election, "maintaining our AAA rating" has been used so often as a Gov't objective that the downgrade carries much greater symbolic political significance than its economic impact should justify. That's politics though. I'm on with an economist on Sunday Supplement. Be interesting to hear his take on things.

Normally, such a symbolic disappointment for a Gov't would be damaging. But thanks to the nonsensical response of the Shadow Chancellor, the Opposition are in a hopeless position to take political advantage. Our problems are the weight of growing national debt, and continuing deficit. My 5yr old granddaughter, Ffion could work out that increasing public spending is politics of lunacy - except in the minds of the economically illiterate/irresponsible/opportunistic (take your pick). Simple message from me will be "symbolically important, politically disappointing and economically insignificant".


Anonymous said...

Oooh dear, ooh dear Glynny baby (and I apologise for using the word dear as there might just be some idiot who, at the mention of the word dear, will mistake it for deer and come rushing with a revolver,.22 or bow and arrow just to get a nibble of the poor deer's heart) but I expect that your 5 year old granddaughter is also wise enough to see through your bluff in your seemingly forgetting just how much store poor old Gideon has placed upon our retaining our AAA rating.

However, as with Danny boy this morning on TV, I accept that you have no alternative but to brazen it out,despite the hurt.

I just wonder how you will present the result of the Eastleigh by-election. Something like 'we always knew that we were going to come in third, and we have had it factored in to our count of number of MPs, but at least we finished ahead of the BNP !!!

two out of ten for effort on this one, I fear Glynny baby.

Anonymous said...

My apologies,Glynny baby, for rubbing salt in to your obvious wounds but just in support of my comment above, on Feb. 10th. Gideon stated '"What investor is going to come to the UK when they fear a downgrade of our credit-rating and a collapse of confidence?"'

Perhaps you can work that into your argument, presumably telling us how good a downgrading in our credit rating is, and actually taking the opportunity to put a new spin on Gideon's love of what was our credit rating!!!

Have you considered sending Ffion along instead of your goodself. She could be a sensible substitution.

As I said ooh dear,oooh dear !!