Saturday, 23 February 2013

Losing AAA rating will cost us dearly

Credit reference agency, Moody, has downgraded the UK's AAA credit rating citing poor growth and a negative outlook on the UK's economy.

We can still afford to pay for
India's space programme can't we?
George Osborne says it doesn't really matter and Ed Balls says that the Tories should start spending even more money.  They're both wrong.

Balls is wrong because we're still spending too much.  "The cuts" aren't cuts in spending, they're decreases in the increases in spending.  The British government is still spending more money than we're paying in taxes and it's just not sustainable.

Osborne is wrong for the same reason.  We're borrowing money at an alarming rate and the cost of borrowing that money will go up as our credit rating goes down.  We're not in Greece or Spain's league where they're having to turn to the equivalent of payday loan companies but even the 0.16% increase in borrowing costs that we saw yesterday are cause for worry when our national debt is anticipated to grow by £120bn (to 98% of GDP) this year alone.  That 0.16% increase would cost us an extra £192m for this year assuming it doesn't go up in the meantime (and I would expect it to after the bad news budget in April).

Both Labour and the Conservatives are utterly useless when it comes to the economy because they're completely wedded to debt.  They know that simply borrowing more money to give it all away isn't going to fix a broken economy but they don't have the vision or the balls to do what is needed - slash taxes, slash public spending and get people working again.