Moody’s has just announced that it is decreasing the UK’s credit rating from AAA to AA1. It doesn’t sound like much but it is the central plank of the Conservative’s policy for the country disintegrating.
David Cameron served as an adviser to Norman Lamont during Black Wednesday. Black Wednesday was when the previous Conservative government’s exchange rate policy disintegrated in a single day and cost the country billions. It rendered them unelectable for a generation. The credit down-rating is arguably worse.
We have been repeatedly informed, and elected the government based on, the idea that austerity and aggressively dealing with the country’s debt was the surest way to a financial recovery and a rejuvenated economy. This has just patently failed: our debt is now harder to pay back and will cost more to service as a result of this move. A move that is the logical conclusion of the extended failure of the government’s policy.
As a country we have had the AAA rating since 1978. This was at the time of the Labour government that we were informed “wasn’t working” and the Winter of Discontent. We had it even through the debacle of the ERM exit of Black Wednesday. Gordon Brown’s stewardship of the economy and the global economic collapse of 2007 didn’t hurt it. For it to be stripped away now is huge.
The Conservatives are lucky it happened after the end of the city trading on Friday. At the start of Friday (a day when the markets tend to be twitchy anyway) would have caused a huge amount of panic and negative press. There is still going to be blood on Monday. The problem is that the Conservatives can’t be seen to ditch their policy or panic. Cameron can’t suddenly get rid of Osborne (who, bluntly, has appeared massively out of his depth forever) but he can’t change the policy with Osborne at the helm.
The line that is being pushed that this is a sign of the problems that the government and country face would be in tatters if we had a reasonable opposition. Unfortunately, Ed Balls aside, we don’t. It’s also happened at the weekend which means, while it will dominate a full media cycle, there aren’t people available to really get their teeth into it. Monday is going to be crucial, as is the reaction of the tabloids and the public. Assuming it trickles down into things like the pound falling on foreign exchanges (almost certain), borrowing becoming harder and more costly (again, near certain) and the ensuing inflation this could very well be the death knell of the government. Even without a proper opposition