Labour has been granted an urgent question in the Commons on the loss of the AAA credit rating this afternoon, and we can expect George Osborne to reiterate his comments over the weekend that this downgrade was a ‘clear message that Britain cannot let up in dealing with its debts’. But will he suggest that the UK can hold onto the AA1 status that it now holds with Moody’s until the end of this Parliament?
Announcing the downgrade, the agency said it didn’t expect any changes in the rating over the next 12-18 months. But it added:
‘However, downward pressure on the rating could arise if government policies were unable to stabilise and begin to ease the UK’s debt burden during the multi-year final consolidation programme. Moody’s could also downgrade the UK’s government debt rating further in the event of an additional material deterioration in the country’s economic prospects or reduced political commitment to fiscal consolidation.’
The AA1 rating isn’t by any means junk status and Moody’s said a ‘combination of political will and medium-term fundamental underlying economic strengths will, in time, allow the government to implement its fiscal consolidation plan and reverse the UK’s debt trajectory’.
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