Friday, 11 December 2009

More Ratings Rantings

Yesterday, Citi said that the UK should pretty much expect to have it's debt rating lowered from its current presitigious AAA rating. If that happens then the risk element of the interest we'll have to pay on our debt will go up to cover the risk of us defaulting. If we slide to a AA rating, it'll go up about 50%, if we go further to an A rating, it'll pretty much double.

Our current Debt was about £600Bn in 2008. Labour are planning on increase the debt by £500Bn over this year and the next two. Almost doubling the debt burden and taking us to well over One Trillion Pounds of debt. That's a number so big, I'm not even sure what I could use as a nice easy point of comparison.

For the year 2008 we paid about £31Bn in debt repayments (just interest on the debt). We're basically suggesting that will double (due to more debt) taking us to about £60Bn each year. If our rating goes, this will get even more expensive to service.

Ignoring the problem of our falling ratings, we should look at the clearest problem Labour is inflicting on us. Essentially, thanks to their massive, unprecedented increase in debt, they have taken £30Bn out of the economy every year in the future. That would have been enough to pay for vitually the entire Defence Budget!

But when the ratings start to fall, then £60Bn of interest repayments will look like a glorious deal, instead we'll be paying a lot more. The next government will be forced to slash public spending, just to meet our repayments. Citi are saying that a Hung Parliament will lead almost inevitably to a down-rating. That parliament then won't be able to make the decisions needed to meet the new debt repayments, further down-rating, more problems.

Essentially, voters will have a choice at the next election. Vote Tory, or the country gets it!

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