Belfast Telegraph

Chancellor defends policy amid credit rating unease

By Ben Glaze and Joe Churcher

Chancellor George Osborne defended the Government's austerity package after Britain was threatened with the loss of its AAA credit rating amid fears over weaker growth and potential shocks from the eurozone crisis.

Ratings agency Moody's put the UK on "negative outlook" on Monday night, increasing the chance of the country being stripped of its cherished status.

Shadow chancellor Ed Balls called the move "significant" and urged the Government to spark economic growth, but Mr Osborne called it "a reality check for anyone who thinks Britain can duck confronting its debts".

The Chancellor told BBC Radio 4's Today programme: "We can't waver in the path of dealing with our debts. Here is yet another organisation warning Britain that if we spend or borrow too much we are going to lose our credit rating but, more importantly, what that leads to potentially is a loss of investor confidence in our economy.

"If people don't invest in our economy, you don't get growth and you don't get jobs.

"It's yet another reminder Britain doesn't have some easy route out of the economic problems that have accumulated over the past decade, it's got to confront those problems head-on and that's precisely what I intend to do."

Moody's said it foresaw three main risks to the UK's top rating, the first being a combination of slow growth with "reduced political commitment to fiscal consolidation" or a "failure to respond" to worsening conditions.

Other dangers were "a sharp rise in debt-refinancing costs, possibly associated with an inflation shock or a deterioration in market confidence over a sustained period" or a fresh banking crisis.

The AAA rating "continues to be well supported by a large, diversified and highly competitive economy, a particularly flexible labour market, and a banking sector that compares favourably to peers in the euro area", it noted.