Here’s Osborne in April 2012, following S&P’s decision to affirm the UK’s AAA credit rating:
“This is a reminder that Britain is weathering the international debt storms because of the policies we have adopted and stuck to in tough times…The budget showed we are ready to go on making the difficult decisions that are keeping our country safe. Once again we are reminded that those who want to spend and borrow even more would lead our country into an economic catastrophe.”
So the AAA rating proved austerity was the right thing to do and changing course would risk losing it which would lead to “economic catastrophe”. But hang on a minute. Today, horror of horrors, another ratings agency – Moody’s, does downgrade the UK. Economic catastrophe? What does Osborne think now?
“Tonight we have a stark reminder of the debt problems facing our country – and the clearest possible warning to anyone who thinks we can run away from dealing with those problems…Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it…
…[Moody’s] make it absolutely clear that they could downgrade the UK’s credit rating further in the event of ‘reduced political commitment to fiscal consolidation’…We are not going to run away from our problems, we are going to overcome them.”
It’s a little confusing because it seems that a AAA rating means austerity is the right thing to do, because losing that AAA would be a disaster, but in the event of actually losing the AAA rating, that also means austerity is the correct path, because the alternative would be much worse. If I didn’t know better, I’d say George Osborne doesn’t know what he’s doing.
* While now is the time to mock George Osborne, it should also be said that while the economic impact of the downgrade is uncertain, in reality it’s unlikely to amount to anything significant. Moody’s are actually making themselves look a little foolish by downgrading another country with its own sovereign currency, who’s risk of default is near enough zero.