Britain’s National Credit Rating Could Be On Way Down
Things are not looking good in the United Kingdom right now as the big shot has been taken at George Osborne by Standard & Poor’s: they are looking to down grade the credit rating of Britain from AAA to a notch below if the Chancellor cannot manage to get the national debt under control somehow. Knowing this is taking place at the national level certainly brings into greater clarity the struggles that average folk are experiencing at the ground level end of things, say analysts. The fact that a towering debt has piled up for the UK means that there were some poor decisions made in the past and many of these have put the UK in a position where borrowing might mean higher interest rates and, just like at the consumer level, higher interest rates help debt build that much faster. Unfortunately for the nation there is no large scale IVA like consumers are able to use to help get themselves out of debt in a reasonable time.
Since the ratings group of S & P is able to make these calls, it makes the economists wonder if perhaps the current Government has not greatly overestimated their idea of a national recovery and even if such an event is taking place right now, just how strong it truly is. Many have said that the judgement of S & P is a shame on Osborne and his government because they gambled on the future of the country and may lose a lot of face in the financial markets around the globe. Now it appears that Osborne is out to set things right by making improving the national credit rating a top priority of his policy. How is he attempting to make sure that things are set right? It appears that what he is setting into action are very sharp cuts in public spending – some of the most severe seen in generations.
During his run for office, Osborne wanted the British public to judge his leadership based on his ability to protect the UK’s credit rating, but since the negative outlook from S & P has been maintained, it is looking like Osborne faces the biggest deficit ever recorded in Britain during a time when a major world war was not in progress. The mere news of the impending S & P downgrade sent the pound sterling’s value down by a half cent – surely not a positive thing.
However, things were not all doom and gloom as the S & P group did manage to say that the framework the government has set up looks to lead to a stronger financial future, although critics loudly chant ‘At what cost?’ It will not be until October that things are really put to the test during an official review of spending when all will be revealed as to how effective the cuts have been. The Office of Budget Responsibility predicts a faster recovery than S & P does, so October will be the time to see when things could be going in the right direction. Since the debt’s cost could well reach 70 per cent of the nation’s annual income, and household incomes may not be able to keep up in order to provide the tax money – things could be bleak, but many hope that things will right themselves in due time.
