Britain Loses its AAA Credit Rating

Britain has joined a host of western nations, which include the USA and France, which have lost their AAA credit rating. Although I don’t care much about the credit rating, to George Osborne it was everything. In the 2010 General Election campaign, Osborne promised the country you could trust the Conservatives with the economy, specifically he said that they would maintain Britain’s AAA rating. Opps. Now that we’ve actually lost the rating, Osborne is pretending that it doesn’t matter to him. It wouldn’t be the first time Osborne has changed his opinion so rapidly, when Labour was carrying out quantitative easing  Osborne said it was a sign of a “desperate” government, he didn’t seem to think so last year when he carried out the exact same policy. The rating downgrade has been described as a humiliation for the government which has put so much emphasis (until now) on our credit rating. For a little historical context, the AAA credit rating has survived the Winter of Discontent, Black Wednesday, the dotcom crash and even the economic disaster of the 2007/2008 recession. Labour has welcomed the news as evidence that the government’s economic plan simply isn’t working and a new one must be thought up quickly and implemented. Despite all the economic indicators to the contrary, the Conservative party seems resolute that there must be little or no change to the austerity program. It’s too early to tell what exactly the effect of the downgrade will be, some economists are predicting that this is the beginning of a ‘spiral effect’; the downgrade will drive up the costs of bonds which will cause the Bank of England to increase inflation which will cause the pound to lose value, this will in turn increase the costs of bonds turning this whole debacle into an economic catastrophe.

Britain was already in a very bad place financially (hence the downgrade), the debt is already very high, and despite all the government’s promises, increasing. The problem with this current government is their policy of austerity to reduce the debt has actually increased the debt and is simultaneously causing economic calamity. Fantastic.

The rating downgrade will be a disaster for both the Conservative’s and Liberal Democrat’s polling numbers, already both parties are very low. Labour is currently leading the Conservative Party by at least 10 points, these polls all taking place before the downgrading. The downgrading will only drive Labour’s lead higher. Although it is still two years away from an election, it is looking increasingly unlikely that the Conservative Party will achieve enough of a comeback to get a majority of seats in the House of Commons in that space of time. Barring any extreme changes over the next two years, the next Prime Minister will be Ed Miliband.