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Danny Alexander: Triple A rating isn’t the be-all and end-all

6 August 2012

6 August 2012

‘I am proud to be part of a UK government that has re-established our country’s financial credibility. And the credit rating agencies rate the UK as triple A. The low interest rates today of 1.8 per cent are a consequence of this.’

Those were the words of Danny Alexander, chief secretary to the Treasury, back in June. He was echoing what his colleagues in the Treasury have been saying throughout this Parliament: that the UK’s credit rating is a testament to the successful economic policies of the coalition. George Osborne was quick to capitalise on the announcement by Standard & Poor’s at the end of July that the UK would maintain its triple A status.

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Which is why an interview that Alexander gave this morning to the Today programme sounded rather odd. ‘The credit rating is not the be-all and end-all,’ he said. ‘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.’

Everything Alexander is saying is entirely sensible, of course. The credit ratings agencies only reflect on the success of the government’s economic policy. And it’s not as though they give the most cast-iron verdicts anyway (remember they gave collateralised debt obligations high ratings). But given he and his colleagues have set such store by their verdicts, pointing to them as a sign that though times are tough, the UK economy is on the right course, it’s difficult to switch from saying they do matter a great deal to trying to suggest they don’t matter after all. It also suggests anxiety in the Treasury that the other ratings agencies will not give the UK the benefit of the doubt that S&P did last month.


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  • http://twitter.com/redlotus2 Alexander Evans

    This resounds of an admission of failure. This could only be spoken by a Keynesian at heart – if the credit rating is negatively reviewed, the cost of government borrowing will increase, requiring the government to further cut spending to attack the debt crisis. Alexander is delusional if he think the primary economic imperative is unemployment as most rational economists abandoned the doctrine of full employment decades ago as it has been proved to be thoroughly inefficient.

  • http://twitter.com/redlotus2 Alexander Evans

    This resounds of an admission of failure. This could only be spoken by a Keynesian at heart – if the credit rating is negatively reviewed, the cost of government borrowing will increase, requiring the government to further cut spending to attack the debt crisis. Alexander is delusional if he think the primary economic imperative is unemployment as most rational economists abandoned the doctrine of full employment decades ago as it has been proved to be thoroughly inefficient.

    • alexsandr

      I don’t think that. But growth is important and increasing unemployment is a nice side effect -as it increases tax revenues and decreases benefit spend.

      I don’t see 100% employment happening again as we become increasingly mechanised – we wont see the huge employers with 100,000’s of employees again.

    • alexsandr

      I don’t think that. But growth is important and increasing unemployment is a nice side effect -as it increases tax revenues and decreases benefit spend.

      I don’t see 100% employment happening again as we become increasingly mechanised – we wont see the huge employers with 100,000’s of employees again.

  • james102

    It is vitally important for as long as the state spends more
    than the taxpayers can afford.

  • james102

    It is vitally important for as long as the state spends more
    than the taxpayers can afford.

  • echo34

    Yeah, like there’s more important stuff like lords reform and being a good greenie..

    Even if if half of us starve, we’ll be dying in a low CO2 utopia.

    • Austin Barry

      Don’t forget the imperative of gay marriage. We mustn’t get side-tracked by the economy.

  • BARMOUTHFAN

    I think that Mr Alexander is implying that increased borrowing might be justified to reduce unemployment. At the moment economic growth is being impacted by the fear of what might happen in the Eurozone. However stubborn their politicians are the electorates in Spain, Greece, Portugal and Italy will not tolerate economic asphyxiation for ever.

    • alexsandr

      if he wants growth he needs to slap Cable to get him to reduce red tape imposed on businesses – not holding my breath :(

  • oldtimer

    So QE has absolutely nothing to do with it then?

  • alexsandr

    what a muppet. If we lose the AAA rating interest rates will rise, causing more of our taxes to be spent on interest.

    and they will also trickle through to personal and business lending. How can increasing lending costs help the economy?

    He should remember every £1 spent on interest is £1 not spent in the shops, buying equipment or employing people.

    • BenM_Kent

      When the US got downgraded interest rates FELL. Which shows that the markets give only the barest heed to what credit rating agencies might say and that other factors such as the ability of the economy to grow are far more important factors (as those of us who predicted the complete failure of austerity have long pointed out).

      By the way, this also emphasises the mendacious 2 year long campaign of fear-mongering by the coalition over something that economically is irrelevant – a AAA rating – over other more pressing priorities, like ensuring people can find work.

    • tele_machus

      He should remember every £1 spent on interest is £1 not spent in the shops, buying equipment or employing people
      *
      Unless of course you say sod it and use a fiscal deficit to stoke growth

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