Thursday, May 21, 2009

Britain's Credit Rating Suffers From Brown's Debt Policy

What we should be discussing is what some of us have warned of for some time - Standard & Poor's downgrading of Britain's credit rating. Their outlook for the UK economy is now "negative" and while it is not yet changing our AAA rating, it warns that there are huge questionmarks over public finances. It is only a matter of time before the AAA rating is downgraded. Here's what Reuters say...

We have revised the outlook on the UK to negative due to our view that, even assuming additional fiscal tightening, the net general government debt burden could approach 100 percent of GDP and remain near that level in the medium term," Standard & Poor's credit analyst David Beers said in a statement.

Beers said S&P had a more cautious view than the UK government of "how quickly the erosion in the government's revenue base may be repaired, the extent to which the growth in government spending can be curtailed, and consequently the pace at which historically high fiscal deficits are likely to narrow".

The June gilt future and the pound tumbled sharply after the announcement.

33 comments:

Anonymous said...

So, we are now well on the way to being completly screwed. It is not the election that will cause chaos, it is NOT having an election that is chaotic.

Anonymous said...

Financial competence?

To which you can also add this story:

http://www.ft.com/cms/s/0/af1ee49e-457a-11de-b6c8-00144feabdc0,s01=1.html

"Alistair Darling, chancellor, is braced for an order by the European Commission seeking the shrinking of Lloyds Banking Group as a condition for the granting of state aid."

Ah..so it wasn't such a good idea

Pogo said...

One sometimes wonders why such weight is given to the "ex cathedra" pronouncements made by these financial instiutions... They are, after all, the ones who cheerfully rated Lehman Bros as "AAA" only minutes before they went bust.

It's doubly worrying when taken with the city's (and all other financial institutions as far as I can see!) propensity for blind panic at the slightest opportunity.

Mind you, it makes for some brilliant "shorting" opportunities for those in the know!

Anonymous said...

Thank you for this - just watched Carrie 92k Gracie interview financial chappie on BBC and had no idea at end of interview as to what preceisely had happened - but was left only with rosy glow about GB's expert handling of economy. I shall stick to Sky in future.

Watching the Titanic founder while the crew are arguing with the Captain said...

So while we are told that an election would cause chaos (only to Cabinet Ministers who are troughing it) the economy goes to hell in a handcart all on its own as a result of Brown's "stewardship". Great.

Vote UKIP and see Brown off.

neil craig said...

This appears to be grade inflation. If there are gradations in an AAA rating then it doesn't mean AAA.

It has been suggested in America that much of their probl;ems were causedby their rating companies, which have a government regulated monopoly position, kept giving AAA ratings to all these $250,000 house loans to people with no money. I suspect the same may applie here it is just that our media are too polite to mention it.

Jonathan Cook said...

It is worth also noting that Brown is trying to bask in glory behind a couple of "suspect words" in the latest IMF report:

http://www.spectator.co.uk/coffeehouse/3634968/in-between-the-lines.thtml

Anonymous said...

The only thing stopping S&P downgrading the debt from AAA is the prospect of a Conservative Government coming in and sorting out the mess. It would hav ehappenned months ago if Brown was ahead in the polls.

trevorsden said...

Someone should tell our Prime Minister that he cannot feed the 5000 with 5 barley loaves and 2 small fishes

North Briton Hunter said...

Here's what David Buik, no friend of the government, has to say:

'£5 billion auction very strong this morning and very well covered – 2 times!! – So much for S&P!! Just to remind those of you like me suffering from senile dementia, this is the same rating agency that triple AAA some mortgage bonds that turned out to be SUB-PRIME!'

And while Reuters may have reported the pound tumbling, it's actually up against the dollar and only very slighlty - 0.33 per cent - down against the Euro.

The Druid said...

The reason it matters is that it becomes more expensive to sell gilts etc. And thus the hole we're in gets bigger. The IMF put its finger on it yesterday. We have got to start cutting public sector expenditure which is balloning out of control. Its at record levels. In May last year we borrowed £1.84bn; this year £8.46bn. If this is not brought under control now we're going to be in for a lot of pain for a long time. The problem with the pornographic coverage of the bilking porkers of Westminster is that this story, far more important in the long run, is shunted off the news.

Newmania said...

As long as the rate on gilts is not going up this is besides the point isn`t it . I have no idea what a credit rating for a country might mean but it is not a financial question
There is not way the UK cannot repay its debts the question is whether it is politically possible for the government to do so. In a docile place like Japan debts are unlikely to effect the credit rating of the cost of borrowing

This is not good news . The country is going to be very vulnerable when the government whoever it is tries to put taxes up and it is seen that there is not more money to be got . Then all the pressures will meet and something will have to give . That something will have to be the Public Sector which will, provoke strikes , then the real credit rating may escalate swelling the cost of servicing debt . I have seen convincing calculations showing that a 25% cut in Spending over a short period may be required just to stay stable . If that is the case I think it not impossible this country may become ungovernable . It has happened before , hope Cameron has the cojones for it .


Besides this developing catastrophe as far as I am concerned expenses is trivia.

Ben said...

Iain, honestly! I totally understand your viewpoint on the debt measures, even if I might not agree entirely with it. However, to start quoting the rating agencies that got the whole financial crisis so terribly wrong is folly.

There are a number of far better commentators than S&P and I don't think there are many analysts they hold any ratings report in high esteem these days.

moorlandhunter said...

As Siouxsie and the Banshees sang: Dear Prudence, where have you gone?

Oh dear.

Stan said...

Yes, but had Cameron and Osborne been at the helm would things have been any different? I don't think so - not do I think that the Tories have any idea how to get out of this situation. Please don't tell me that it would be unwise to reveal Tory policies before an election - if there were any difference between Tory and Labour that wouldn't matter!

Oliver Drew said...

@trevorsden - Brown couldn't feed 5 people with 5000 loaves of bread and 2000 fish.

Umbongo said...

The Times doesn't agree. OTOH what is the Times doing bigging up the statement by the IMF (Chairman: French unreconstructed socialist Strauss-Kahn) that Brown is the financial wunderkind of the global economy? Apparently Murdoch hasn't given up on Labour yet or, more to the point, hasn't given up on politics organised through the major parties which has led inexorably to the impotence of Parliament. He is obviously concerned that Labour (and the Conservatives who supported both Brown's fiscal policies and his solutions to the banking crisis) will suffer in the EU elections.

Lee said...

I remember someone telling me about a golden rule, something about 40% and debt? Who was that, his name escapes me. But then that statement has pretty much escaped him so in these "special times" he cannot be blamed. What next? It is almost depressing that these people can be so deluded in there own self importance and rightousness that they cannot understand when their time is up. Who will he blame? Answers on a postcard.....

Hawkeye said...

Pogo said: "...They are, after all, the ones who cheerfully rated Lehman Bros as "AAA" only minutes before they went bust."And now they have UK plc on AAA rating.... should we expect a bust in the next 10 minutes?

Anonymous said...

GORDON BROWN;
Unelected,unwanted,unreasonable,unjust,unfair,uncaring,
unabashed,unacceptable,unasked,unapproachable,unable,
unbalanced,uncanny,unconcerned,uncouth,uncontrolled,
undermined,unforgiving,unnatural,unrelenting,
unstable,unsuitable,unseemly,unviable,

and finally,he is very obviously;

UNWELL - Doctors,the screens please.

Man in a Shed said...

Perhaps Nick Brown's misTweet is really driven by the fact that the country can't last until the last moment in June 2010 !!

Its time for some patriotic Labour MPs to pull the plug on their failed administration and go and sort the mess out in opposition.

But are their any Labour MPs who will put country before party/career/expenses accounts/their jobs ?

I'm guessing they are too gutless, weak and self obsessed to act.PS Note Govt borrowing for April has had a steep and far greater than expected rise, due to alarming collapse in tax receipts!

Anonymous said...

Newmania

Putting taxes up. Unless I'm a complete loon, putting up taxes is going to reduce demand. The last thing this economy needs right now is increased long term taxation.

That, along with higher interest rates that are bound to come sooner or later, will destroy the housing market and commercial property and result in yet another hole in bank balance sheets. More bailouts. Oh, and I forgot. As demand diminishes, more corporate debt goes bad.

What it does need is a massive reduction in public sector spending. The government has no option but to put a hatchet to spending.

Fausty said...

The IMF isn't optimistic about the UK's outlook. There's almost no chance of Labour slashing spending because his dogmatic mantra is "spending our way out of recession".

The banks are wobbly and our borrowing is sky high; all we need is another costly crisis for investors to shun our debt. Then we'll need IMF assistance.

The country can't afford Brown and his demonic scorched earth policies.

titus-aduxas said...

@trevorsden: Someone should tell our Prime Minister that he cannot feed the 5000 with 5 barley loaves and 2 small fishes

The point is moot, the troughers in the cabinet would eat them before they got anywhere near the 5000.

Mark Senior said...

Sadly just another thread from a Conservative desperate to do down this country's economy in the hope of short term political gain .
The pound is at the highest level against the dollar and euro since last November , if it keeps going up you will soon be complaining it is too high and harming exports .
The government and hence the British people as a whole are also benefitting from the rise in the value of the bank shares we hold RBS at 40 plus currently , I recall you were whinging at the "loss" when they were down at 13 .
My own company is having it's best period for order intake since October .
I just hope that we do not get a Conservative government with policies that will stop this fragile recovery and lead to 5 million unemployed and a double dip recession .

Mirtha Tidville said...

It doesnt really matter whether or not you believe Standard and Pisspoor, they arnt telling us anything we dont already know. Brown knows very little about economics and the free market and didnt want to know, because he is an old fashioned, tribal, Clydebank Socialist.(The sooner we float Jockland off the better)

The trouble is he is still at the helm driving us faster into the water and will continue to do so until either next May or the men in white coats turn up, whichever comes first. (I know which I want)

I just hope that the Bozos who voted this lot in gather enough intelligence to realise what they have done and NEVER repeat the experiment.....

sobers said...

What I find amazing about this whole IMF/S&P business, is there is a complete acceptance of the fact that nothing will be done to even propose cuts/tax rises before next year. If the Labour party had any decency whatsoever they would force GB to do the right thing for the country, not for themselves. A rolling programme of spending cuts, and tax rises will HAVE to come, so why wait?

It is pure party politics, seeking personal advantage at the expense of the electorate. It just shows that Labour have not an ounce of honour between them.

(I exempt Frank Field from that - he's hardly Labour anymore)

Anonymous said...

5000 loaves of bread and 2000 fish is just Prescott's breakfast.

Invest Money Lab said...

The worse is coming... I think the market will correct big time this round...

Anonymous said...

When will the touchy subject of public servants pensions get a proper airing?
The sooner ALL of them are forced to switch to a personal pension scheme, paid for by themselves rather than being subsidised by taxpayers like the rest of us, then the better off we will all be.

Equitable Life Pensioner

Chalcedon said...

Dammit. The pound had been rising against the US$. Curse McBroon for his recklessness.

ROMAN JONES Esq. said...

The case for an early general election is truly unstoppable. In all seriousness, Britain is as close to a full-blown revolution as I can ever recall - it was even discussed on BBC Radio 4's PM programme tonight by Eddie Maier and his guests. The only real thing holding the current Establishment in place is the (so far) less than catastrophic economic slump. If the tanks rolled into Westminster, and in the name of the Queen - a Ministry of all the Talents (but not MPs) took the reigns of power, I don't think the public would lift a finger in defence of the old order. Bastille Day is coming!

Moist said...

Take a look at TrueBlueBloods take on this today. He is so right that spending cuts are a taboo subject and Cameron needs to adress them and hence address the debt