Labour’s plan would have cost us our AAA rating

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.