Moody's: Osborne created even more uncertainty by ditching surplus target

 
Jake Cordell
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George Osborne is yet to declare who he is backing in the leadership contest
George Osborne is yet to declare who he is backing in the leadership contest (Source: Getty)

George Osborne has added fuel to the fire of uncertainty by abandoning his target to balance the books by the end of the decade, Moody's said today.

The ratings agency said the chancellor's announcement last week that he would no longer be seeking to run a budget surplus this decade instantly heaped more pressure on UK's credit status and could lead to further downgrades.

Moody's said: "By abolishing this medium-term anchor for the country’s public finances, the government has further increased the already elevated level of uncertainty over the direction of economic policy."

Analysts acknowledged that "a somewhat looser policy stance in the near term is not a surprising policy step given the profound economic uncertainty generated by the referendum", but pointed out Osborne's targets gave investors confidence in the UK as a place to stash their cash.

"The medium-term focus of the UK's fiscal policy set-up and the higher degree of clarity and transparency that came with it [was] a positive aspect of the UK's credit profile ... [which] allowed the government to reduce its large budget deficit at a slower pace than would otherwise have been feasible without losing credibility."

Experts expect the government's borrowing requirements to jump over the next few years as economic growth - and thus, tax receipts - stumble in a period of post-referendum uncertainty.

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