The credit ratings agency Fitch has put the UK on negative outlook (meaning that a downgrade is likely over the next two years).
In light of the considerable uncertainty around the economic and fiscal outlook, including the risks posed to economic recovery by ongoing financial tensions in the eurozone and against the backdrop of a still large structural budget deficit and high and rising government debt, the Negative Outlook indicates a slightly greater than 50% chance of a downgrade over a two-year horizon.
In other words, the British government is spending and borrowing too much, and if the eurozone collapses, we are toast.
Ed Balls, who has spent the last couple of years urging the government to spend even more, is worried:
It shows that there’s a growing worry that our economy’s not growing, that unemployment’s rising, that our borrowing’s not coming down as George Osborne had planned.
Mr Balls has called for Mr Osborne to borrow and spend more. His old Brownian nostrums are becoming more ridiculous by the day.
In truth, Mr Osborne and Mr Balls both have the same prescription to get us out of our problems. That is to extract more tax out of us.
Mr Balls thinks that if the government spends even more, it will “stimulate the economy” and the tax receipts will roll in.
Mr Osborne doesn’t agree. He thinks explicit tax rises are needed, and has indeed enacted them, including that VAT rise.
What they both have in common is that they both think the State is sacrosanct. Mr Osborne wants to protect it by whacking the rest of us with higher taxes. Mr Balls wants to protect it – and indeed increase it – by borrowing even more.
Labour, the Conservatives, the Liberal Democrats – they all believe in the State as a kind of benevolent Big Brother. They don’t see the State as a provider of vital services that should do it at lowest possible cost. Instead they see the State as the solution, as a player, as the planner that will decide how Britain is to prosper.
In short, they are all what used to be called Social Democrats.
No wonder David Cameron is getting on so well with Barack Obama. They are political soul-mates.
So here we are, with the electoral system rigged in favour of the three old parties, who all agree on almost everything. But there is a wind of change coming. Support for parties outside that cosy threesome has been growing for some years now. Even within the old parties, the MPs and especially the activists are increasingly restless. Mr Cameron should enjoy his time basking in the sun, because it won’t last.