David Maddox: UK’s loss of AAA bragging rights flags up coalition partners’ mutual vulnerability
THE loss of the UK’s AAA credit rating at the end of last week finally confirmed one thing that many people have long suspected about the Conservative/Liberal Democrat coalition: it exists solely to prevent the two parties from committing mutual suicide.
Long gone are the rose garden smiles and the wistful chat about a new centre-right future of the two parties working together. Many disappointments and small betrayals, as well as a visceral hatred between large sections of the two parties, had put paid to all that. But the one thing that held the two together was the great economic plan: the George Osborne/Danny Alexander blueprint to get Britain out of the worst economic crisis to hit this country since at least the 1930s.
The mantra which came with all the tax rises and the austerity cuts was that at least the UK’s AAA status was being protected. Ministers of both parties said this showed that the UK was trusted by the markets and that, while painful, it proved the plan was working.
It was also at the centre of the plans for recovery. The stimulus package, such as it exists, was based on banks lending money to small and medium-sized firms protected by the record low interest rates offered to the UK because of its AAA status.
Now, following the demise of the AAA status in the United States and France, the UK has also been downgraded. It was not a surprise given that Osborne has had to admit he won’t meet his borrowing targets. It may in fact make little difference in reality – at least to the economy – but while Business Secretary Vince Cable was sent out on Sunday to dismiss the loss of the rating as “just symbolic”, on a political level it means the coalition started this week with very little political glue left to hold it together.
Neither party now can fall back on the AAA status and it is harder for them – perhaps particularly for the Lib Dems – to keep telling their supporters that the austerity measures are working. It is certainly going to make the run up to the Budget at the end of March even more pressurised than before.
There is remarkably little else the two parties agree on. And this week also includes the first by-election where the two have gone head to head, courtesy of Chris Huhne’s resignation in Eastleigh. Defeat for either party will be bad news.
For Nick Clegg, it would show the Lib Dems can’t hold on to a seat, while for David Cameron it would show that the Tories cannot win a key marginal.
But what it will show is how vulnerable both parties would be if a full general election was called. Labour has a healthy lead in the polls and UKIP is threatening to overtake the Lib Dems in the popular vote.
With no AAA bragging rights and an economic policy that seems only to be hurting, neither party can contemplate fighting a general election just now. What keeps them together is desperate shared sense of wanting to survive and the hope of some sort of improvement by 2015.
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Monday 20 May 2013
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