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UK 'need not fear loss of AAA status'

 

Ben Chu
Wednesday 12 December 2012 00:30 GMT
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Britain has no reason to fear a spike in borrowing costs if stripped of its AAA credit rating, the Government's fiscal watchdog suggested today.

"It's not entirely clear that [a downgrade] would be providing any new information to the markets that they hadn't already managed to deduce," the chairman of the Office for Budget Responsibility, Robert Chote, told the Treasury Select Committee today.

At last week's Autumn Statement the Chancellor, George Osborne, conceded he is likely to miss his self-imposed target of putting the national debt on a falling trajectory as a share of GDP by 2015-16.

Fitch warned that this "weakens the credibility of the UK's fiscal framework" prompting speculation that the agency will downgrade the UK next year. Some eurozone nations have seen their borrowing costs spike after downgrades.

But Mr Chote pointed out that the United States and France had not seen their borrowing costs increase after losing their AAA status. He also suggested to MPs that a country like the UK, which can print its own currency, is unlikely to default.

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