Editorial: George Osborne's wake-up call

When it finally came, the loss of Britain's much-prized triple-A credit rating passed with barely a whimper in the markets. True, sterling wobbled a touch; but it quickly recovered. Meanwhile, the FTSE 100 rose, albeit only slightly. All of which only confirms the extent to which the gloomy growth forecasts cited by Moody's have long been priced in by investors.

While the economic implications of Britain's downgrade may be minimal, the political impact is anything but. And for that, the Chancellor has only himself to blame. It was he, after all, who made the triple-A the central tenet of his economic strategy. Is it any wonder that, now it is lost, his opponents are making hay?

The Chancellor hopes to characterise the downgrade as a "stark reminder" of Britain's debts and a spur to "redouble" efforts to reduce them. But his critics now have a solid stick with which to beat him. Nor is the rambunctious Ed Balls the only trouble. Even as Labour views Moody's judgement as evidence of a Chancellor going too far, the Tory right claims it as proof he is not going far enough. Indeed, such is the angst within the party that the once-untouchable George Osborne is looking vulnerable.

The run-up to the Budget was always going to be a testing time. Now, however, Mr Osborne is under even more pressure to pull a rabbit from the fiscal hat next month. This newspaper has long criticised the complacent assumption that private sector growth would automatically fill the gap left by the retreating state. The Budget is the Chancellor's opportunity.

That means tackling thorny structural issues: shaking up planning laws, addressing the blockages in the banking system, and shifting what spending there is from the unproductive (such as benefits for wealthy pensioners) to the economically productive (such as capital investment). In so straitened a fiscal environment, the Chancellor's room for manoeuvre is limited. But he can do more with what he has. It can only be hoped the triple-A debacle will finally prod him into action.