UK credit rating threat

Discussion in 'Politics' started by Jason, Apr 17, 2010.

  1. Jason

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    The three big ratings agencies have all delayed their report on the UK credit rating until after the election. Presumably this will be the week following.

    All three have started leaking. The leaks are that if there is a hung parliament they will downgrade the UK credit rating. This will increase the cost to the UK of the debt. Asuming that just one agancy downgrades by one level then the UK is looking at an additional £10bn a year or thereabouts.

    Loss of our top rating would hit the City badly, and damage the source of 12% of our wealth. Maybe another £10bn pa, though very hard to estimate.

    Everyone in a job would need to contribute an extra £700 pa (in addition to expected increases) to cover this hole in our accounts. The situation has very high risks of a downward spiral - indeed a probability of a downward spiral. Depending on how well or how badly a hung parliament does we could well be looking at needing IMF help.
     
  2. Joll

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    Yeh - Kenneth Clarke mentions it in today's Times. Credit rating expected to be downgraded if we get a hung parliament. He also says we currently don't get many benefits from our AAA rating...not sure why this would be so?

    Why are they so worried about a hung parliament tho...surely it would mean sensible economic measures would have to be accepted by all parties. Or...would it mean no action could be taken effectively? Would a coalition need to be formed, or what?
     
  3. 123scotty

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    Call free 08009169186 ocean finance quick
     
  4. dandelion

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    this was being discussed today. Commentators observed that most european countries have some sort of coalition government and it causes no problems. One exception to this general rule being Greece, where having a majority government does not seem to be helping. They also said that the UK had coalition governments for 1/3 of the last century. The simple truth is that the one organisation a hung parliament would be really bad for is the conservative party. Theyre running scared! But basically what they are saying is, 'vote for us or the nasty bakers will get you'. Maybe we ought to think about which party to vote for which will help us get the nasty bankers instead.
     
  5. Jason

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    Many countries have parliamentary structures set up to work with coalitions. The UK system is not so set up. The architecture of the debating chamber says it all - a government facing an opposition separated by a distance which was designed to be two swords' lengths. It may well be that we should look to reform the structures, but that isn't going to happen before the morning of 7th May. A hung parliament will (probably) not function adequately, and the three credit reference agencies have given notice through their leaks that they will not even give it the benefit of the doubt. They will move against Britain.

    I suppose there is a grey area. A Lib-Lab pact agreed on 7th May might solve the uncertainty (but I do mean a full pact). A minority government might just work if it is a seat or two under strength. But the cold reality is that if we get a hung parliament we can expect a swift rating downgrading, and this is probably going to send us into a nose-dive.

    This is not an issue of politics. The politicians have steered us into a position where the key decision facing the country can no longer be expressed as a choice between political parties. Rather it is a stark choice between life goes on (with some cut backs), or we crash.

    Scotty has one sort of answer (his post above). In a manner of speaking I've taken it. I have today shifted some cash I'm not going to be using for a while into gold. I never thought I would do this, especially not at a time when gold is very highly priced. I'm doing this because I think the UK may well be facing a hung parliament and I think the economic prospects for this country with a hung parliament are now known to be terrible. I'm also aware that if the markets become convinced we are going to get a hung parliament it is possible that we will have movement before the election.
     
  6. dandelion

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    If i remember rightly, Winston Churchill was instrumental in having the chamber rebuilt after bomb damage to the same design, because he believed in the adversarial system. But then, he also changed sides twice in his political career. Not many politicians do that nowadays. In his day the parties of goverrnment were themselves coalitions whose members moved about.

    What structure needs to be reformed? The british government confuses the executive and the legislative branches. There is absolutely no reason why the legislature cannot function on a vote by vote basis. Every day government is a matter for the queens appointed ministers. The only tricky bit will be deciding who these shall be. There is absolutely no reason why a government should fall just because it cannot get the legislation it wants.

    why?

    The cold reality is this is nonsense. No party has made any proposals to significantly alter current government fiscal policy. What are markets hoping for? That a new conservative government will immediately abandon every one of its manifesto commitments?

    But every party is saying the same thing. How will it cause a problem if the next government is made up of 1/3 from each?

    You mean bankers are trying to control the outcome of the election by making threats against the british people??? What would Mr Churchill have said about that?
     
  7. Jason

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    The ratings agencies are not the bankers. They apply some pretty abstruse formulae in a relatively objective manner. Their boffins have looked at a hung parliament scenario and realised that their formulae mean they will downgrade. Whether they are right or wrong so to do is irrelevant - they will do it. There is an argument that they should keep quiet and stay out of the political process. This would indeed avoid any possibility of seeming to influence the UK election. But people in the agencies have a moral compass. If the UK reaches the wrong decision at the election there will be a financial collapse with all the misery and poverty that will cause. So people in the ratings agencies react in the only way they can think of - they leak.

    Churchill would be horrified that the UK had got itself into such a state of debt that these agencies have power over our future. He would not advocate that the UK comit suicide by defying them.
     
  8. dandelion

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    David lloyd George, liberal prime minister presiding over a coalition government during WWI including Churchill, for those who didnt know, noted in his memoirs that no one should ever trust a banker, after the way they stitched up war loans to Britain greatly to its disadvantage.

    Really, I have to say your argument is becoming absurd. The country has been ticking along nicely under labour for 13 years and would do so for the next 13. A change to conservative will make absoulutely no difference to what action is taken about the budget defecit. In a sense it is a side issue, because none of the parties would do anything differently. There is absolutely no reason why a coalition government now in the uk should not be successful as during WWI, or as it is in many other, in fact most other, European countries. The only difference perhaps, is that the conservatives are adamant they would not cooperate with other parties, despite this being in the national good. From where I sit, if thats what they want to do then I will be well content with, say, 100 liberal MPs in working partnership with 250 labour.
     
  9. Jason

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    It is not my argument. It is not an argument being advanced by the Conservatives (though Ken Clarke did mention it) and I haven't heard Lab or Lib Dem speak about it. Rather it is what the leaks say the credit reference agencies will actually do. We can all speculate why (and particularly why now) but this is all by the by. What matters is their action.
     
  10. dandelion

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    No it isnt by and by. You suggested that out of the goodness of their hearts the credit rating agencies are giving the Uk a kindly warning. Really. Did someone you trust give you personally this warning? If it really exists, what makes you think such a warning is true, or that the reason for it is to help Britain, rather than make its situation worse, if it ends up with a conservative government which will fail to join in with international efforts to control banks. Mate, this is war and you are trusting the enemy? Dont you understand that a free market means the guys out there are out to shaft you?
     
  11. tomthelad91

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    I think it's pretty terrible that people would change their vote and avoid a hung parliament because of the credit rating saga.

    This is just Tory propaganda. Other countries deal just fine with coalitions, the days of Labservative dominance are over.

    It was the Tories who changed our society into a materialistic one, it was the Tories who developed such a reliance on the Tertiary Sector and dessimated our core manufacturing and Primary sectors, and now it's all blew up in their face 20 years later.

    The Tories are getting angry now that they're slipping in the polls. Cameron and the Upper bands of society believe its their turn to rightly rule the country again.

    Cameron can airbrush his face, airbrush his logo, airbrush his real views - but he can't airbrush out the Liberal Democrats.

    Vote with your feet on May 6th against Cameron and his League of Evil.
    Or pay for it when your Hospital is closed down in his savage round of un necessary cuts.
     
  12. Jason

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    The headline story on the FT today is how the markets will move against Britain in the event of a hung parliament. If we go the way of Greece - which is what is now looking possible if we get a hung parliament - there will not be the money for the public services we are used to.

    Tomthelad91 clearly doesn't like the Conservatives. But he needs to take on board that cuts will happen whichever party is in power, and because of the market movement they will be far more severe in the event of a Lib-Lab victory. Indeed in the event of a hung parliament it may well be that they will be imposed by the IMF, not a UK government.
     
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