By Matthew Barrett
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Following the release of a report by credit rating agency Moody's, which adjusted Britain's credit rating outlook to negative, several think-tanks and campaign groups have reacted to the news.
The Institute of Economic Affairs' Editorial Director, Philip Booth, said:
"The downgrade threat from Moody’s should come as no surprise. Whilst Moody’s are correct to cite the difficulties in the eurozone as a potential threat to the stability of government finances, many of the problems facing the UK government are home grown. Public spending continues to rise and the Office for Budget Responsibility has shown that there are huge pressures forthcoming from the effects of ageing populations due to increased health, long-term care and pensions costs. Furthermore, the pressures on business coming in the form of increased regulation – including in the vital banking sector – are supressing growth. All these things mean that the UK’s top-notch credit rating is deservedly on a knife-edge."
The Centre for Policy Studies' Head of Economic Research, Ryan Bourne, wrote:
"This intervention by Moody’s is therefore a timely reminder that the Government is doing the bare minimum to address our debt problem. In the upcoming Budget, George Osborne must at the very least indicate that he would be willing to make further spending cuts should circumstances require. Furthermore, he must take opportunities to enhance medium-term growth prospects through the only non-costly, pro-growth policies at his disposal: supply-side reforms. Whether reforming the tax system, deregulating, labour market reforms or policies to improve international competitiveness, the Chancellor must surely see the need to be bold."
John Longworth, Director General of the British Chambers of Commerce, released a statement saying:
"The Chancellor and the Prime Minister must pull out all the stops to enable British businesses to drive growth here at home. Reforms to employment law and planning must be significantly speeded up and promised infrastructure projects must start on-site. Regulations must be slashed, access to capital improved so as not to choke off recovery, and business needs a favourable and encouraging tax regime. The Moody's report underlines the fact that ministers must move from rhetoric to real, tangible action and delivery on all fronts to support business. The Chancellor's forthcoming Budget must also do more to support business confidence and jobs without endangering Britain's financial credibility."
Matthew Hancock, the Member of Parliament for West Suffolk, pointed to a section of the report which said "The UK’s Aaa rating could potentially be downgraded if… [there was] reduced political commitment to fiscal consolidation, including discretionary fiscal loosening". Hancock said this meant :
"This report confirms what we knew all along, that Labour would put Britain’s credit rating at risk. “Moody’s warn that any fiscal loosening could lead to a downgrade, showing that Labour’s plan for £200 billion more spending, more borrowing, and more debt, would jeopardise Britain’s AAA rating. “Under Labour, we would see interest rates soar, hitting hardworking families, businesses and homeowners."
> Today's ToryDiary: George Osborne's economic policy gets a "reality check" from Moody's