The UK’s AAA rating is likely to be downgraded next year after the Office for Budget Responsibility cut its prediction for economic growth, ratings agency Fitch has warned.
The OBR’s new figures showed that even after a five-year parliament of spending cuts and tax rises, the Government will still be borrowing around one in every 10 pounds it spends.
The official growth forecasts increase debt to £105bn in 2016/17, making it impossible for chancellor George Osborne to meet his target to reduce the share of public debt to national income by 2015/16.
Fitch, which put the UK’s AAA status on “negative outlook” in March, said “missing the target weakens the credibility of the UK’s fiscal framework, which is one of the factors supporting the rating.”
It says: “The OBR now judges that the supplementary target of falling public sector net debt by 2015/16 is likely to be missed. This is consistent with our assessment in September.
“The Government has chosen not to chase the supplementary target by deploying additional consolidation measures over the next two years. In our view, missing the target weakens the credibility of the UK’s fiscal framework, which is one of the factors supporting the AAA rating. We forecast gross general Government debt to peak at 97 per cent in 2015/16, approaching the upper limit of the level consistent with the UK retaining its AAA status.”