You’d think that after the bad economic news of the past week, George Osborne might have reverted to submarine mode as soon as he possibly could, moving quietly under the cover of the Olympics. But this afternoon he has stuck a periscope up with this message: the world has confidence that Britain is dealing with its economic plan.
It’s a bold statement to make after Wednesday’s GDP figures, and Labour has already mocked him for doing so, but Osborne is responding to the announcement overnight by Standard & Poor’s that the UK will continue to enjoy an AAA credit rating. The ratings agency said: ‘We project that, despite recent weakness, the UK economy should begin to recover in the second half of 2012 an steadily strengthen, and we expect economic policy to continue focusing on closing the fiscal gap.’
The Chancellor said this afternoon:
‘As Britain welcomes the world to our country for the Olympic games, this is a reminder that despite the economic problems we face, the world has confidence that we are dealing with them. The deficit has fallen by a quarter; inflation has fallen by half; employment is rising, with British businesses creating over 800,000 new jobs; and the economy is rebalancing, with Britain now exporting more to the rest of the world than Europe.
‘And as S&P themselves say, what would damage Britain’s creditworthiness would be relaxing our resolve to deal with our debts. We won’t do that.’
The reason Osborne feels the need to resurface and highlight this announcement is that a threat to the UK’s credit rating is the most powerful threat to his own credibility as Chancellor. Those three As and the low cost of borrowing are the trump cards he produces not just at key events like the Budget, but at every Treasury question time, and in response to every urgent question. He sees them as key indicators that his plan is working, and any threat to those indicators threatens him, too.
The FT reported that the GDP figures had spooked bond investors this week, who warned that Moody’s may downgrade the UK from its current negative outlook. It’s worth noting too that Standard & Poor’s is alone among the major ratings agency in not putting the UK on negative watch. This submarine has not moved into calmer waters yet, by any means.