All eyes on the Pre-Budget Report tomorrow - basically a daft name, as it's really an autumn Budget statement, with little to differentiate it from the main spring Budget.
We can debate the pros and cons of the PBR - personally I'd prefer to scrap the Budget entirely and just introduce finance bills like any other bill in the Queen's speech - but in the current economic crisis, we'd certainly expect a set-piece like this to provide a platform for lobbyists who want to exercise disproportionate influence on government policy.
Which is presumably why credit rating agency Moody's has just come out with an assessment that the UK (and the US) could "test the boundaries" of the top AAA credit rating due to the high debts being incurred because govt revenues have collapsed in the wake of the economic crisis. A summary is provided here by the unusual (for giroscope) source of the Taipei Times: I couldn't find a decent UK-based reference, having just seen the report on Channel 4 News.
On the face of it, downgrading the UK's status from AAA seems totally absurd. Debt is currently predicted (by OECD) to reach around 90 per cent of GDP in 2010. Many countries have run debt levels a lot higher than 100 per cent with no long-run problems. We've got a hell of a long way to go before we reach that point. So why are Moody's acting nervous?
When viewed rationally, the issue must be political rather than economic. Moody's is run by banking types who do not like the Labour government - particularly if, as is quite possible, it is set to move a bit further for the left - and so they want to engineer a financial crisis by downgrading the UK, ensuring a Tory victory in the 2010 election, at which point they will upgrade it again. It's the dirty tricks brigade - simple as that. And anything Moody's are putting out now is at least as dodgy as the infamous 2003 dossier from the UK "Intelligence" (ha!) services on Saddam Hussein. Alastair Darling should say as much in tomorrow's speech, and should point out that the credit rating agencies - who were shown up to be a complete bunch of clueless morons when 'safe' investments went belly-up in the credit crunch - are deliberately bullshitting investors for political ends. This govt has reaped the biggest dividends from the current crisis when it has faced down the bankers and squared with the electorate. And I do believe the best in this vein is yet to come.
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Even by your own lofty standards this reaches new heights of disingenuousness. Debt is predicted to reach 90% but this figure excludes future Public Sector Pension liabilities and PFI deals (amongst other things)It's rare to see you use the OECD as an unqualified source. Factoring in liabilities in particular, the figure rises to nearly 200%, which admittedly might be sustainable in the very short term but in the longer term is likely to lead to national bankruptcy a la Zimbabwe.
Whilst I would agree that Moodys' motivation is no doubt to protect its interests in the banking sector, you don't need to be in the banking sector to want to see the back of this government, the worst seen in this country's recorded history. The government's (and your) contention that the stratospheric levels of public expenditure and debt required to fund it are either required or sustainable is certainly bullshit which would be laughable if the consequences were not so potentially serious. A downgrading of our creditworthiness to AA would be the least of our worries.
Looking at the Moody's website neither of the comparator countries, either in Sub Saharan Africa or South East Asia is actually quoted. The long run impact of failure to make huge cuts in public expenditure and necessary reforms to prevent the public sector from expanding back to its current level could be total economic collapse. The Moody's report if anything is far too generous to this regime.
When one considers the opposition they have faced at every turn from the extreme right, the achievement of this government starts to look absolutely stratospheric. Even if it was led for ten years by such a shyster as Tony Blair.
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