Another blow for George Osborne as Fitch downgrades UK's credit rating

Agency worried by 'weaker economic and fiscal outlook'

George Osborne’s dreadful week was capped off tonight when a second credit rating agency stripped the UK of its AAA rating. Fitch downgraded Britain one notch from AAA to AA+, citing a “weaker economic and fiscal outlook”. The news came as a body blow to the Chancellor, who asked to be judged on his success in defending Britain’s gold-plated credit rating when he took office in 2010.

Earlier this week the International Monetary Fund downgraded the UK’s growth forecast for 2013 and 2014 more than any other advanced economy. And in a political embarrassment for Mr Osborne the Fund also advised the Chancellor to consider slowing the pace of his spending cuts, a course that has long been urged by the Labour Party.

Explaining its decision to downgrade, Fitch said it had acted because it now expects Britain’s gross national debt to peak at above 100 per cent of GDP in 2015-16 and not to start declining until 2017-18. In his Autumn Statement last year Mr Osborne abandoned the second part of his self-imposed fiscal mandate, which was to put the national debt on a falling trajectory by the end of the Parliament.

Fitch becomes the second of the major credit rating agencies to strip Britain of its top rank, following Moody’s' downgrade in February. The third big agency, Standard & Poor’s,reaffirmed Britain’s AAA earlier this month, but warned that there remains a one in three chance that it could downgrade.

Next week could bring more pressure on Mr Osborne to adopt an economic “Plan B”. The Office for National Statistics is due to reveal whether or not the UK economy slipped into a triple dip recession earlier this year when it reveals its estimate for growth in the first quarter of 2013. The statistics agency will also release the public finance figures for the final month of the 2012-13 year, which will show whether or not the budget deficit is rising once again under Mr Osborne’s watch.

Since Mr Osborne’s first budget in June 2010, in which he ratcheted up the deficit reduction plans he inherited from the previous Labour government, the UK economy has barely grown. The Treasury’s official forecaster, the Office for Budget Responsibility, now does not expect the UK economy to make up the ground lost in the deep 2008-09 recession until 2015.

Despite the downgrade, Fitch said in its statement last night that the UK retained an “extremely strong credit profile”. Responding to the statement, the shadow Chancellor, Ed Balls, said: “This downgraded Chancellor needs to wake up and realise that his failing economic policies are causing long-term damage and Britain’s families and businesses are paying the price.”

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world