British plan to stick with austerity
Treasury chief George Osborne declared that the action by Moody's Investors Service redoubled his commitment to the government's policy of cutting spending in an effort to reduce deficits.
But Labour Party spokesman Ed Balls said Saturday that the government should increase borrowing to give immediate stimulus to the economy.
Announcing the downgrade one notch from the top AAA to AA1 on Friday, Moody's said sluggish growth and rising debt were weakening the British economy's medium-term outlook.
Osborne had once boasted of the triple AAA rating as validating his policy, but he soft-pedaled its importance as a downgrade became increasingly likely. Two other major rating agencies -- Fitch and Standard & Poor's -- have Britain still at AAA but on negative watch.
Public sector borrowing remains stubbornly high, and is forecast by the government's Office for Budget Responsibility to be around $182 billion for the year ending in April, little changed from the previous year.
The U.K. economy stagnated in 2012, with just one quarter of growth.
Osborne said the downgrade was "a stark reminder of the debt problems facing our country," with a debt accumulated over the years exacerbated by Europe's economic crisis.
"We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs," Osborne said.
Balls charged that Osborne was incapable of admitting a mistake.
"The plan has not worked," Balls said.
"I think the prime minister (David Cameron) is going to have to ask himself, 'how do I get change in our economic policy for the good of the nation?'" Balls added.
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