The coalition government's deficit reduction strategy got a boost today as credit rating agency Moody's confirmed the UK's coveted AAA rating.
Moody's praised the 'decisive action' already taken to control Britain's ballooning debt. It said that spending cuts were necessarily to balance the books and warned against relying simply on growth to pay off Labour's debt.
Confirming the UK's AAA rating, the Moody's report said:
"The UK's creditworthiness remains high due to the ambitious fiscal adjustment programme
'The private sector is likely to compensate for the contraction in government spending, and real GDP growth will remain above 2% through the middle of this decade.'
'Moody's believes that the front-loaded package of spending cuts laid out in the government's Comprehensive Spending Review will allow the UK's [debt to stabilise]. This would allow debt affordability to remain at a level that is consistent with a AAA rating.
"Nominal GDP cannot be expected to be sufficiently dynamic for governments to grow out of their public debt. Decisive adjustments of government budgets seem to be the only reliable way to achieve this. It is therefore important that the UK has embarked on important cost- and expenditure-cutting structural reforms."
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