Tuesday, 26 October 2010

The Real Test

One of the only true tests of whether Britain is going to survive as an economy, and not go the way of Greece or ultimately even Zimbabwe, is the confidence shown by the international credit agencies.

Without their belief that we can service our debt, their interest rates would rocket and we would effectively be bankrupt. It was no secret that such an action was very much on the cards prior to last May's General Election, and that only the prospect of a change of government away from Labour stayed the hands of those crucial credit agencies.

It is therefore a considerable relief that Standard and Poor (who along with Moodys form the Big Two in this arena), having previously retained Britain's AAA rating (which had been at severe risk of downgrading at the beginning of this year), today show that AAA rating as being stable.

This is the real test; and although other organisations have parts to play, do be careful or contrary pronouncements by those who are paid for out of the public purse. Their views cannot be trusted if they go against what S&P and Moodys are deciding and how they act, and the latter duo have actual financial expertise and represent the real world, not the (generally lefty) public sector.

Therefore let the real experts indicate what is true, and (if they are up to it) others such as the IFS flesh out the details in an attempt to be helpful and of value. If they can't or won't do that, then I can't see any value in having them and perhaps they could be scrapped.

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