Fitch's forecast

Britain's triple-A credit rating has always been of great importance to Chancellor George Osborne as he continues to pursue his austerity policies. So yesterday's warning from Fitch, one of the three American leading credit rating agencies, that the prestigious triple-A status might be in danger because of high levels of debt will not have been welcome in the Treasury -- especially just a few days before Mr Osborne delivers his most important speech of the year in next week's parliamentary Budget debate. Fitch has put Britain on “negative outlook” until at least 2014 because the agency has concluded that “there may be very little room for manoeuvre” if there were an “adverse shock” in the financial markets. Another credit agency, Moody's, gave a similar warning a month ago. I think Labour would be ill-advised to make political capital out of these warnings. The credit agencies are under increasing surveillance in the European Union for their freelancing forecasts and were criticised to their face by the House of Commons Treasury Select Committee only last week for their failure to accept responsibility or even apologise for their poor performances in advance of the 2008 credit crunch.

Warnings based on possible future developments such as an “adverse shock” are of little value since they can be made in the most general way without chapter and verse to support them.