Paying down baby debt may have sounded like a good policy in opposition, but George Osborne’s intervention to try and get banks (those largely publicly funded institutions) to lend money in an economy that’s as close as Ireland to contracting again, is faltering… The Daily Mail reports lending to business is down by £10 Billion on last year…
And Moody’s have put the UK on notice that its AAA rating is switched from positive to negative. They cite two primary reasons:
1.) The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside. 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.
2.) Although the UK is outside the euro area, the high risk of further shocks (economic, financial, or political) within the currency union are exerting negative pressure on the UK’s Aaa rating given the country’s trade and financial links with the euro area. Overall, Moody’s believes that the considerable uncertainty over the prospects for institutional reform in the euro area and the region’s weak macroeconomic outlook will continue to weigh on already fragile market confidence across Europe.
Not exactly Osborne’s doing says Paul in Lancs. Osborne’s real (but largely unspoken) excuse is uncannily similar to that of Alisdair Darling’s: there’s a meltdown in world credit markets on, and there’s no sign of it going away anytime soon.