While Westminster is currently absorbed by the difficulties facing Nick Clegg over allegations relating to the conduct of the former Lib Dem chief executive, Lord Rennard, in the longer term it remains the economy that will decide the result of the next General Election.
With that in mind, the news that the UK has, on Moody’s assessment, lost its triple A credit rating, whilst unlikely to have a major economic impact never the less remains a political embarrassment for a chancellor who had set such stall be retaining the top rating.
Having in 2009 warned of the country facing “the humiliating possibility of losing its international credit rating”, we now have the unedifying sight of the very same George Osborne somehow suggesting that the downgrade is a sign that the government’s prescription for UK PLC is the right one. The word farce springs to mind.
But the farce has now spread further than Westminster, with the downgrade having, over the weekend, made its way into the debate over Scotland’s future.
On Saturday, the SNP called on the Better Together to ‘pulp’ a leaflet being distributed over the weekend which they argued played up the virtues of Scotland being part of a triple A country.
Kevin Pringle, Alex Salmond’s senior political spokesman, tweeted on Saturday:
“On Thursday, No said they ‘simply offer facts’. Today’s leaflet says Scots save billions ‘due to the UK’s AAA credit rating’.”
“The leaflet they’re asking us to pulp, we’re no longer using anyway. The triple AAA rating was mentioned in one bit of campaign material that we’re no longer using, so it’s a bit of a fail from them [the Yes Campaign] really,” he said.
“They’re just clutching at straws. If they want to pulp it, they’ll have to drive round and knock on people’s doors and ask for it back.”
More importantly, however, in arguing that the downgrade proves the need for Scotland to go it alone, Scotland’s finance secretary, John Swinney, has once again called in no uncertain terms for a change in tact from the Chancellor ahead of next month’s budget.
Speaking to BBC Radio Scotland over the weekend he declared:
“We could have invested more in our capital estates rather than reducing capital budgets by now 26% – a quarter – and the consequence of that is to deliver very sluggish economic activity.
“The UK government has got it wrong on all counts and it now needs the chancellor to take action very swiftly in the budget to stimulate the economy and provide the platform for growth which they have failed to do since 2010.”
It’s an assessment shared also by the Scotsman newspaper. Whilst concurring with the views of Vince Cable that the downgrade was ‘largely symbolic’ as opposed to a major economic game changer, the paper’s leader column this morning has itself called for a change of course.
“It is the critical verdict on the coalition’s progress in staunching the growth in debt and its failure to lift the economy out of stagnation that should surely command government attention. These were the principal reasons for Moody’s to act as it did. The timing of its move, coming in the midst of a bitter by-election battle and ahead of a budget where the chancellor is set to fall short of his deficit reduction targets, has given its verdict an additional electric charge.
“This could surely not have been lost on Mr Cable. The verdict has also exposed the pound to another bout of weakness, having already fallen 7 per cent in recent weeks.
“It is here that Mr Cable’s reaction hovers between complacency and wilful blindness. Businesses will now be concerned that interest rates may be forced up to prevent further sterling weakness getting out of hand. And the logic of the rating agency’s position would suggest that the chancellor redouble his efforts to curb the budget deficit, either by tax increases or by further spending cuts. It is towards the latter course the chancellor is set to lean.”
It concludes, however, in looking ahead to the Budget:
“A ‘same again’ performance on 20 March would leave the country – and the government – even more exposed than we and they already are.”