Osborne & the Ratings Agencies
…you cannot have a sustained recovery until you show the world that Britain can pay its way.
And let me tell you, the world is watching Britain at the moment.
It is casting doubt on our country’s creditworthiness.
It is questioning our resolve to deal with our debts.
LONDON, Oct 12 (Reuters) – The focus on the health of Britain’s public finances during the past three weeks of party conferences has reinforced the stable outlook for the country’s triple-A credit rating, ratings agency Moody’s told Reuters.
Moody’s reaffirmed its top rating for British government debt on Sept. 9, and unlike rival Standard & Poor’s kept a stable outlook — something which lead UK analyst Arnaud Mares said had been justified by the growing political consensus for fiscal consolidation.
Britons better understand the need to reduce heavy public borrowing than the public in neighbouring countries with similarly stretched finances such as France, said Mares, who is also Moody’s lead analyst for French government debt.
“The outlook is as secure as it was previously, but the assumptions we have made over the past months have to some extent been vindicated by the messages that have been conveyed by senior politicians,” Mares told Reuters.
How to tackle Britain’s swelling budget deficit — which the finance ministry forecasts will hit 12 percent of gross domestic product this year, requiring 220 billion pounds of gilt issuance — is now a major theme in the run-up to a national election due by June.
The opposition Conservatives, who opinion polls predict will defeat Prime Minister Gordon Brown’s Labour Party, last week proposed freezing public sector salaries, raising the retirement age and cutting some benefits to reduce government spending. Brown also accepts the need to reduce the deficit, though he is concerned that solid growth returns before sharply tightening fiscal policy.
Mares declined to comment on which party offered the better proposals for reducing the budget deficit, saying all parties now understood the need for tighter fiscal policy. (my emphasis).
It seems to me that the ‘world is watching’ but that it’s saying that, even though Brown (correctly) wants growth to return before any fiscal tightening, it is not ‘casting doubt on our creditworthiness’.