The news this week that Moody have downgraded UK plc from AAA by one notch, is not unexpected and in itself it may have limited economic repercussions. The pound has recently been allowed to fall and it is difficult to see that it will fall much further given the weakness of the competitive economies (US Dollar and Euro). However, politically this is a body blow for the Tories and an unnecessary one.
Having sworn to keep the AAA rating George Osborne looks like a chump. But there is a wider issue here, which is that he keeps on asking us to judge him on things that are either unimportant or unattainable. In his first budget he pointed to a 'march of the makers' as our economic saviour ; based on one quarters data he told us that UK manufacturing would be the engine for growth. Typical of the man, as manufacturing is just 11% of our economy it would have to have grown by 50% in three years to match reductions in public spending! Predictably, like an over loaded donkey this march descended into a stumbling walk. Now every time we get poor figures on manufacturing the opposition can rub salt into the wound.
However, his biggest mistake has been his ambitions to growth GDP when hacking back the public spending. How anyone can expect the economy to grow when we are reducing the size of the state by more that our historic trend rate for GDP growth. Shouldn't he be asking us to measure his performance not on growth but by how much he is reducing government spending.
These are just three example of George Osborne simply not understanding the art of the possible. My advice to Dave is that we need a realist in the job and we need one now, so let's cut George adrift!
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