Britain says austerity policies 'vindicated' by US downgrade

6th August 2011, Comments 0 comments

Britain's deficit-slashing austerity measures have been "vindicated" by Standard & Poor's move to slash Washington's top AAA credit rating, a government spokesman said Saturday.

"Abandoning our deficit reduction plans would put Britain back in the international firing line -- and we are not in that firing line because our credit rating is secure," said the spokesman for Prime Minister David Cameron's Downing Street office.

The comments came after S&P cut the United States' top rating down a notch, to AA+, for the first time ever, technically signalling that the country's reliability for paying its debts had decreased.

Britain's Conservative-Liberal Democrat coalition government, which took office in May last year, has sought to axe public spending and hike taxes in order to slash a record deficit and preserve the nation's top-level AAA credit rating.

"Because of the decisions the government has taken to deal with our debts and support a sustainable recovery, Britain's credit rating has been reaffirmed, helping to keep the cost of borrowing down for taxpayers, homeowners and businesses," a Treasury spokesman added on Saturday.

But the opposition Labour Party, which was ousted from power by the coalition in May 2010, argued that British finance minister George Osborne has cut spending too quickly and too deeply.

"The problem in Britain is that George Osborne's plan is not working," said Labour finance spokesman Ed Balls in a statement.

"By trying to go too far and too fast, confidence has been knocked and last year's recovery has been choked off."

But Business Secretary Vince Cable said Washington's downgrade was "entirely predictable" after lengthy US political wrangling to lift the debt ceiling, adding that Britain's rating was safe due to his government's swift action.

"This was an entirely predictable consequence of the mess that the Congress created a few weeks ago when they couldn't agree on lifting the debt ceiling," he told Sky News.

"But they have now agreed that, and the United States' position is pretty secure," added Cable, who is a Liberal Democrat.

"What it tells us about the wider picture is that financial markets are now focusing on the credit worthiness of governments. Three years ago it was on the banks and the banks' stability, and now it's on government debt.

"And that's why the UK is in a fairly good position. The markets perceive that we have got a stable government... and we are getting on top of the deficit problem and we have got a very clear programme to deal with it."

Economic Secretary to the Treasury Justine Greening, the number five in the finance ministry, said the US downgrading showed that a deficit reduction plan was "critical" in creating the right conditions for growth and jobs.

"When we came into government the UK was on negative watch by Standard & Poor's on our triple-A rating," she told BBC television.

"The reason we were able to keep it was because of the steps we took in the emergency budget and spending review, and of course we have also got the advantage of a stable government.

"That's stood us in good stead over the last 12 months."

© 2011 AFP

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