Top finance minister in clash with Osborne over credit rating

Fears of blow for Chancellor as deputy plays down importance of credit status

Speculation grew yesterday that George Osborne's economic credibility could be about to suffer a stunning blow as his deputy sought to downplay the importance of the UK's vaunted AAA credit rating.

Danny Alexander, the Chief Secretary to the Treasury, told the BBC that the UK's top-notch status "is not the be all and end all". That was in sharp contrast to the Chancellor's emphasis in recent years on the overriding economic importance of Britain retaining its AAA status.

In opposition, Mr Osborne said keeping the gold-plated credit rating was one of the "benchmarks" against which he wanted his economic record to be judged.

The words of Mr Alexander, pictured, were interpreted in some quarters as the Government preparing the ground for a highly embarrassing downgrade of the UK by one of the major agencies.

The country's AAA status has come under pressure over the past years as the recovery has stalled and public borrowing forecasts have risen as a result. Major rating agencies put the UK on negative watch earlier this year, implying that they might strip Britain of its AAA status. Although Standard & Poor's gave the all clear last month, Moody's still says the UK is at risk of a downgrade. And Fitch is expected to give its verdict in the coming months.

However, most City analysts believe that the economic impact of the UK losing its AAA status would be insignificant. "It wouldn't be the end of the world. It would already be priced in by the markets," said Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club. "It's more of an issue of national psyche and national pride".

When the United States was downgraded from AAA status last year by Standard & Poor's in the wake of bitter partisan wrangling in Congress over the national debt ceiling, Washington's costs of borrowing fell as investors disregarded the agency's analysis and continued to plough their money into US government bonds.

Yet a UK credit downgrade would generate still more political embarrassment for Mr Osborne, who has come under fire for his radical deficit reduction strategy which critics argue has helped to plunge the UK economy back into recession. In the second quarter of 2012 the UK economy contracted by 0.7 per cent according to the Office for National Statistics.

Mr Alexander said that putting the UK economy back on the right track was more important than retaining the AAA. "What matters is have we got the right policy mix for the country to get people back into work, to support economic growth, to deal with the huge problems in our public finances, and the credit agencies reflect on those things and the ratings they give are a reflection of the credibility of that mix" he told the BBC's Today programme.

Mr Alexander's words were an echo of the view of Adam Posen, a member of the Bank of England's Monetary Policy Committee.

Mr Posen told the Treasury Select Committee in February: "I have never given sovereign ratings that much concern…I do not view sovereign ratings as the be-all and end-all of our credibility with markets."

A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Arts and Entertainment
booksThe best children's books for this summer
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Antoine Griezmann has started two of France’s four games so far
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor