Alistair Darling today will contest growing doubts over Britain’s economic recovery as he tries to show the markets that he is serious about halving the £180 billion deficit in four years.
On the eve of his Pre-Budget Report, the Chancellor was confronted with figures that suggested that Britain would struggle to climb out of recession before the end of the year.
Industrial output failed to grow in October — considerably worse than expected — and a CBI survey suggested that gloomy manufacturers expect output to fall in the coming months.
One international ratings agency put Mr Darling on notice that he must act swiftly to pay off the record public debt or risk losing Britain’s prized “triple-A” credit rating.
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Credibility deficit
Bankers dodging to save bonuses from tax
Darling warns Whitehall of ‘real cuts’ to halve £180bn budget deficit
The agency, Moody’s, said that plunging tax receipts for years to come would mean “an inexorable deterioration” in the Government’s ability to pay its debts. It said that Britain was in a fundamentally weaker position than Germany, France and Canada, which also have AAA ratings.
Its comments sent the pound lower on foreign exchanges against both the dollar and the euro.
The agency indicated that Britain had only retained its rating because it had convinced international investors that it would take action to reduce the budget deficit.
In a further sign of how poorly Britain’s public finances are regarded by the international markets, the cost of insuring against a possible debt default by the UK Government yesterday climbed to the same level as that to insure against a default by Portugal, whose economy is regarded as one of the weakest in Western Europe.
Insuring $10 million of UK government bonds against default rose to $74,000 a year, up from $72,500 on Monday. At the end of September the cost was $44,000.
The Chancellor will acknowledge a new era of deep spending cuts. Existing budgets will remain unchanged until 2011, but he will admit that safeguarding frontline hospital, school and police services will mean deep cuts elsewhere in the years that follow.
On the eve of his Pre-Budget Report, the Chancellor was confronted with figures that suggested that Britain would struggle to climb out of recession before the end of the year.
Industrial output failed to grow in October — considerably worse than expected — and a CBI survey suggested that gloomy manufacturers expect output to fall in the coming months.
One international ratings agency put Mr Darling on notice that he must act swiftly to pay off the record public debt or risk losing Britain’s prized “triple-A” credit rating.
function slideshowPopUp(url)
{
pictureGalleryPopupPic(url);
return false;
}
Related Links
Credibility deficit
Bankers dodging to save bonuses from tax
Darling warns Whitehall of ‘real cuts’ to halve £180bn budget deficit
The agency, Moody’s, said that plunging tax receipts for years to come would mean “an inexorable deterioration” in the Government’s ability to pay its debts. It said that Britain was in a fundamentally weaker position than Germany, France and Canada, which also have AAA ratings.
Its comments sent the pound lower on foreign exchanges against both the dollar and the euro.
The agency indicated that Britain had only retained its rating because it had convinced international investors that it would take action to reduce the budget deficit.
In a further sign of how poorly Britain’s public finances are regarded by the international markets, the cost of insuring against a possible debt default by the UK Government yesterday climbed to the same level as that to insure against a default by Portugal, whose economy is regarded as one of the weakest in Western Europe.
Insuring $10 million of UK government bonds against default rose to $74,000 a year, up from $72,500 on Monday. At the end of September the cost was $44,000.
The Chancellor will acknowledge a new era of deep spending cuts. Existing budgets will remain unchanged until 2011, but he will admit that safeguarding frontline hospital, school and police services will mean deep cuts elsewhere in the years that follow.
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