by Stephen Tall on August 6, 2012
Lib Dem chief secretary to the treasury Danny Alexander has signalled an interesting shift in the government’s economic approach, downplaying the significance to the economy of the UK’s continuing triple-A credit rating. Here’s what he told the BBC (courtesy of PoliticsHome):
“The credit rating is not the be-all and end-all. What matters is have we got the right policy mix for the country to get people back into work, to support economic growth, to deal with the huge problems in our public finances and the credit agencies reflect on those things and the ratings they give are a reflection of the credibility of that mix.”
Compare Danny’s equivocal statement with George Osborne’s bombast just last week in the Telegraph:
George Osborne, the Chancellor, has claimed that the reconfirmation of Britain’s gold-plated AAA by a key credit rating agency shows that the “world has confidence” in the Coalition’s deficit-reduction plan. … “As S&P themselves say, what would damage Britain’s creditworthiness would be relaxing our resolve to deal with our debts. We won’t do that.”
It was a curious decision of the Chancellor’s to attach such importance to the credit agencies’ ratings, not least because their decision is outwith his immediate control. And while I don’t by any means always agree with the Guardian’s economics editor Larry Elliott, it’s hard to disagree with this assessment:
Forget for a moment that the ratings agencies forfeited their right to give advice to governments when they gave AAA ratings to the toxic waste spewed out by Wall Street and the City of London in advance of the financial crisis. Ignore the evidence that the sky has not fallen in when other countries have been downgraded. While these are important points to bear in mind, the real problem with allowing policy to be dictated by the ratings agencies is that it is so clearly at odds with the government’s vision. This can be summed up quite simply: get the economy moving; meet the targets for deficit reduction; win the 2015 election. As things stand, none of these objectives will be achieved.