Why Moody's gave the UK a 'negative' alert

Moody's said in its statement putting the UK on "negative watch" that one of the "key drivers" behind its decision was "the increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years".

In other words, the lack of growth in the UK economy is in danger of causing George Osborne to miss the fiscal targets that the Chancellor set out in his 2010 emergency Budget.

As the graph, right, shows, the Government's own fiscal watchdog, the Office for Budget Responsibility, has been steadily increasing its estimates of the amount of public borrowing that the Government will have to do each year.

What lies behind these increased borrowing forecasts from the OBR is not any deviation from the Chancellor in the pace or scale of his spending cuts. Rather they were prompted by a collapsing growth outlook for the UK.

Without robust growth, the unemployment benefits bill automatically rises and tax revenues automatically fall, forcing the Treasury to borrow more to meet its commitments.