Cut tax and spending, Tories tell Chancellor
CHANCELLOR George Osborne was facing renewed demands last night from the Tory rank-and-file for tax and spending cuts after Britain was stripped of its prized AAA credit rating.
Ministers and senior party figures rallied round the Chancellor in the wake of the decision by agency Moody's, predicting it will have little impact on the Government's borrowing costs.
But Conservative backbenchers warned that next month's Budget was the "last chance saloon", demanding cuts to corporation tax and capital gains to revive the economy.
Meanwhile, Labour reiterated its calls for borrowing to be increased in the short term to fund a fiscal stimulus.
Explaining its move on Friday, Moody's pointed to "subdued" growth prospects in the UK and a "high and rising debt burden".
It now expects the "period of sluggish growth" to "extend into the second half of the decade".
Speaking on the BBC's Andrew Marr Show, Business Secretary Vince Cable dismissed the downgrade as "largely symbolic".
"In terms of the real economy there is no reason why the downgrade should have any impact," the Liberal Democrat said.
"If you remember last year the US was downgraded, the economy grew strongly relative to Europe... and France had a downgrade last year. Its interest rates that it borrows long term in the markets are only a little above ours.
"These things do not necessarily affect the real economy but they reflect the fact that we are going through a very difficult time and we are trying to balance the need to get the deficit and the budget under control with the need to get back to economic growth."
"The rating agencies have a pretty bad record. They are a bit like tipsters. They get some things right and a lot of things not right.
"They are part of the background noise we have to take into account."
Mr Cable also flatly ruled out deeper spending cuts, suggesting that kind of policy was coming from "right-wing ideologues".
"I think to embark on a slash and burn policy in response to this would be utterly foolish and counterproductive, and I am sure we will not be going there," he said.
On the question of whether the Government could afford to spend more, the Cabinet minister said: "I thought it depends what the spending is for. We have to reduce government current spending, that is what we are trying to do...
"But there is a lot of government spending that is investment in the future, investment in skills and science and infrastructure, and we have got to continue doing that."
Mr Cable said the argument about whether the coalition should shift from plan A to plan B was "a bit juvenile".
Tory former chancellor Ken Clarke warned it would take years to regain the top credit rating and return to "sensible economic growth".