Osborne’s austerity plans fail as Britain is stripped of AAA rating

For the first time since 1978, the UK has lost its top AAA credit rating, which was dropped to AA1 over pessimism about the economy’s growth over the next few years.

Moody’s Investors Service downgraded the UK’s credit rating from the highest possible AAA rating to AA1 rating, saying they were concerned that the already blighted economy would face “challenges” until at least 2016.

According to Moody’s, their analysts predict the economy will remain “sluggish” but “stable”.

Chancellor of the Exchequer George Osborne had previously pledged that the coalition government would defend the AAA rating at all costs. 

Critics have called this a sign that the chancellor needs to rethink his economic recovery strategy, which has so far relied heavily on austerity measures.

However, Mr Osborne said that the news had not dissuaded him from current tactics, saying: “Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it.”

“We will go on delivering the plan that has cut the deficit by a quarter,” he added.

In contrast, the Labour Party has said the “embarrassing” rating should be a sign to the chancellor that his austerity tactics have to change.

Ed Balls, the Shadow Chancellor of the Exchequer, said: “This credit rating downgrade is a humiliating blow to a Prime Minister and Chancellor who said keeping our AAA rating was the test of their economic and political credibility.”

Germany and Canada are now the only major economies to maintain a AAA rating.

Corinne Pinfold