CREDIT ratings agency Fitch yesterday warned that the government’s budget deficit reduction plan is too slow.
The agency says the Treasury needs to be more aggressive in reducing the spiralling budget deficit, which stands at £178bn. Alistair Darling announced plans to halve the deficit within four years at the Pre-Budget Report last year. Total UK debt is expected to rise to £1.4 trillion in that time.
Fitch is often the first of the big credit rating agencies to downgrade the debt of sovereign nations. Rival ratings agency Standard & Poor has already placed the UK’s triple A credit rating on “negative watch”.
Lord Mandelson, the business secretary, also underlined the high stakes involved in the pre-election Budget. He warned that both Britain and Europe faced a phase of “rapid relative economic decline” if governments failed to cut spending.
All this sniping between the two main parties about who is going to cut what is ridiculous because they seem to be trying to score points by claiming the other party will cut too much.
You can’t cut too much. We are crippled by debt – look at this graph of public and private debt as a percentage of GDP (from order-order.com)
Yet again we lead the world – and it couldn’t be clearer that what we once called Labour’s Economic Miracle was financed by borrowing money. Nothing more, nothing less.
So really, talking of cutting a billion here or a billion there as though it were a bad thing is not helpful. It’s like trying to clear your £5k credit card bill by giving up penny chews – sure it’ll help, but not very much – and it won’t help at all if you’re still borrowing more money to pay the mortgage you can’t afford, which is basically what the government is doing; the current budget deficit is £178 billion. That’s how much money the government will be short of this year – another lump to add to the national credit card.
It our national credit rating is downgraded from it’s current triple-A rating, we will have to pay even more to borrow the money we’re living off. Happy times.
So, yeah – cut away, please.