'UK loses top AAA credit rating for first time since 1978'

That the recession is going to drag on and we are not going to be paying off the debts in a hurry. Vote of no confidence in Osbourne?

According to Danny Alexander (boo) they are not going to diverge from their course. No growth then?

The credit rating assesses a country/company's/individual (C/C/I) risk of not repaying any debt they may have. The methods of calculating this are arcane but include present indebtedness, likely future indebtedness, ability to service debt and a number of other quantative and qualitative factors that may affect a C/C/I ability or willingness to pay its debts.

In theory when a C/C/I has their credit rating reduced the interest they are charged for any further borrowing by other C/C/Is will go up to reflect the increased risk of default on the debt and borrowing may be more difficult. In a national situation this can lead to higher interest rates in the economy with all the bad/good effects this can have, companies paying more for business loans to invest in capital projects, which may mean urgently needed and productive manufacturing investments aren' made, harming the economy long term or even leading to some companies moving to a lower interest economies, leading to job losses, mortgage rates go up but of, course interest rates on savings rise, which is a plus for some.

In fact a minor downgrading like this is unlikely to have any significant effect on the UK. Other countries in the same situation, which I think include the US, seem to find that the reduced credit rating has no real effect on anything. However should if fall to A, or heaven forfend BBB, then the s**t really hits the fan.

In the meanwhile, it is a slap across the wrist for Osbourne, who has until now been able to boast that there is international approval for his policies because we have kept our AAA ranking while other countries in a similar situation have lost theirs because they are not considered to have economies as well managed as ours in the current situation. Well we now join the list of countries whose economies are not considered as well manages as they could be.

I agree with you Flick apart from the last sentence. I think it is beyond most of us to understand which countries are 'well managed' within this rating. We mostly have political affiliations which are bound to affect our perception of this but the UK is not doing too badly when compared to many EU countries and for that I am greatful.

I suspect I am in the minority in that I agree with some of the present government's actions and disagree with others. I always find it hard to choose which party to vote for as they all have something going for them and all have something with which I disagree.

Thought I heard on the radio this morning that the only countries to retain their AAA rating are Germany and Canada. Apparently this has been expected for some time and the markets have already adjusted for it.

I think you are right Barrow not really news at all.

if those that set the rates thought Osborne's policies were the best they could be in present circumstances they wouldn't have reduced the rating.

This doesn't mean everything he is doing is wrong, no government is ever all wrong or all right, but does mean he needs to be less blinkered and intractable and more open to new ideas and consider the possibility that he is not infallable. Nobody is perfect.

I disagree Flick. Moodys have based this on what they think of the economy, not the policies. That does not mean they disagree with Osborne, it just means we are not doing as well as we were which may, or may not, be down to current policies. I don't think they make a right or wrong judgement.

Movedalot

I find myself in agreement with you, all the way. Very similar to what I would have written.

The AAA rating has been 'on watch' for a while and as such has been taken into account by the markets, albeit thus far. Next week we will see what impact it will have on us. Have they not agreed that the policies the government are taking are not the whole issue. It is the influence of the EU which is in recession and the difficult worldwide trading conditions that are shaping our economy, much the same as all other countries.

I do find Balls amusing when he says Osborne has lost credability by the UK lossing the AAA rating. Then he went on to say 'he told us all' that the likes of Moodys and S&P are rubbish at making any judgements.

I am not by any means saying the government cannot be doing more. There is always more to do. I just wish I could hear policies, not political spin by them all.

POGS re: your last para. yes, don't we all

The economy is affected by government policies. Moody's think government policies are making the rate of recovery slower than is necessary. This puts us at a disadvantage compared with other countries and as the economy is not growing we will need to borrow more money than originally planned, which will increase our debt burden, that or cut government expenditure back even more than it has been at present present. It has been suggested that further cuts of between 25% and 33% will be necessary to meet current deficit reduction plans.

What do you think the Government should do Flickety?
Not being sarcastic, I remember seeing on one of the threads somewhere that you are an economist.

Osborne seems determined to go with the second of your options, FlicketyB!

Flickety, it's very useful having someone on this thread who knows about economics. Though I find the politics of the whole thing interesting and often frustrating, I have trouble finding my way thorough the mazes of the economy.

anno when did not being an expert on a subject ever stop any of us?

Tougher times ahead for those of us who have retired abroad on UK pensions- as the £ is likely to plummet.

granjura I think it already has! We have seen it so far at the petrol pumps so it is bound to affect lots of other things too.

I don't call where you live abroad?

Do you mean me Galen It wasn't intended to imply I did. Just responding to the comment about the £ plummetting. Has petrol not gone up in Bristol too?

Wouldn't know. I drive my car so seldom, less than a thousand a year, I haven't bought any diesel for about 6/12
I think the petrol increases are mostly tax. I heard on the wireless today that 62% of the price is tax!

Yes, it is mostly tax but the recent increases are not due to that, mainly the fact that the £ has plummetted not only against the $ but also the €. DS2 is happy as he lives in Holland and has just been shopping in New York!

Well I'm up to Norway and Iceland in June, are they in the EEC?

I confess, I am an economist, but the advice I would give is not specific to economists, it is if you find yourself in a hole, stop digging.

We need some balance between reducing expenditure and encouraging growth and we desperately need a government that thinks through its initiatives before it launches them. The pasty tax, the tax on static caravans that threatened to close down a large and successful exporting industry in an area of high unemployment. A government that dances on a head of a pin to produce the latest policy that they say will mean we will not need to sell our houses if we need care, but does nothing of the sort, meanwhile the policy of quantative easing continues driving down the value of annuities so that older people are less and less able to fund the care they need as they grow older.

We need a government with a coherent, thought through economic policy, rather than one driven by an obsession with the latest poll ratings and what is being posted on twitter.

I used to consider that the Labour party was well meaning but incompetent and the Conservatives, unpleasant but efficient. Currently we have a Conservative party which is unpleasant and incompetent. Does that mean there is a chance the Labour party may become efficient?

Eventually, possibly, but not with the current shadow cabinet, IMO.