The UK has been stripped of its coveted AAA credit by a second agency.
Fitch has joined its rival Moody’s in reducing the credit rating to AA+ and its decision comes on top of the call from the International Monetary Fund for the government to rethink its austerity plans.
When the government was elected, the Chancellor, George Osborne, staked his entire reputation on keeping our AAA credit rating. He said that the credit rating was the most important measure of the economy’s strength and he used it to justify the huge cuts and the assault on the poorest parts of the country in particular. The loss of that rating shows even on the measure on which he asked to be judged he and this government have failed the people of this country.
Meanwhile, a fundamental piece of evidence used by Osborne to justify the so-called ‘austerity’ measures has been completely discredited. Two Harvard economists, Carmen Reinhart and Kenneth Rogoff published research in 2010 which appeared to show that countries who borrow more than 90% of the value of their economies go into recession. The research had looked at evidence from across the world and Reinhart and Rogoff were widely regarded as experts. The research was based on a spreadsheet which automatically calculated the result used by the economists and our government relied on the research when it made the cuts to services, jobs and benefits.
Amazingly a mistake has now been uncovered, three years after the research was published. The spreadsheet didn’t add up properly due to some errors in the way it was set up. The true figure should have shown growth of 2.2% - a respectable figure which would have justified investment to stimulate growth rather than the cuts which have choked off recovery. In America, Barrack Obama chose to ignore the research in 2010 and instead decided to invest and to stimulate the economy, which of course is why the Americans have enjoyed growth while we have faced a double dip recession.
Reinhart and Rogoff have now admitted they were wrong by the way. I wonder whether our chancellor and the rest of the Conservatives and Lib Dems who followed his lead will admit they were wrong too.
Back in the real world, the mistakes made by the Tories and Lib Dems as a result of following the wrong policies translated into a big jump in unemployment as latest figures show an extra 70,000 people out of work, including an extra 20,000 under 25s. That means nearly 1million young people are out of work and judging by the lack of jobs and how hard it is for young people in Merseyside right now current policies are not going to turn things around anytime soon.
Long-term unemployment is still rising, while David Cameron prioritises tax cuts for millionaires.
But there is hope. Unlike the Tories, Labour is serious about tackling youth and long-term unemployment.
We'd guarantee a job to any young person who has been out of work for over a year as part of our Compulsory Jobs Guarantee.
We'd also create 33,000 apprenticeships as part of High Speed rail, and ensure other big Government projects include apprenticeships too.
In short, we'd give people a chance. But people can’t wait for the next election. This government needs to admit it was wrong and that the evidence it used to justify the cuts is completely discredited. The government needs to act quickly to grow the economy and create jobs.