Newsnight interview transcript on Fitch announcement

Emily Maitlis: Ed Balls, the credit ratings agency Fitch has warned today that the UK is on a negative outlook, your response to that?

Ed Balls: I think the credit rating agencies are a weather vane – they tell you the direction in which things are moving. And the UK going on to a negative watch, it shows that there’s a growing worry that our economy’s not growing, that unemployment’s rising, that our borrowing is not coming down as George Osborne had planned. Now I’ve said to George Osborne always, don’t set your policies by the credit rating agencies, but they are a weather vane and they say the wind is blowing in a difficult direction for the British economy.

EM: Yeah, and Fitch is not saying spend more to get yourself out of this, it is saying we are not going to reduce debt quickly enough, your policy would make that even worse.

EB: Fitch were the people who said four years ago, sub-prime mortgages, ‘keep them on triple A.’

EM: Oh right, so they’re wrong then?

EB: Well the credit rating agencies, I think have consistently got the financial crisis wrong, they said Lehman Brothers was a safe bet; my point to George Osborne has always been you should never make you policy by the credit rating agencies, that is not what they are good for…

EM: So George Osborne shouldn’t really worry about then, broadly it is not a worry?

EB: If it wasn’t for the fact that George Osborne set this as his test. Go back a year and a half ago, what did he say? He said, ‘I’d have stronger growth, I’d get unemployment down, I’d get borrowing down.’ All that has disappeared because the economy has flat lined, unemployment is rising, borrowing £158bn more. The only thing he has been saying for the last 6 months is ‘I can’t change course because I’ll lose the support of the credit rating agencies’ and even now, this is the second rating agency in a month and a half to say ‘move things on to a negative.’ So George Osborne made the wrong call to let the ratings agencies dictate the policy, it is the wrong policy, he has gone too far and too fast and it is not working.

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Posted March 14th, 2012 by Ed's team