Downgrade of XXX Credit Rating - Mark 2

During the day, I've agreed to be interviewed on this issue in both Welsh and English. Some consistent themes have been coming through the questioning. Let me reflect on them and on what I've said.

Firstly, there's the economic impact of the downgrade itself on the UK's credit rating to Aa1 by Moody's. My approach has been to dismiss this as not being anything significant. In reality, it has had almost no traction with the general public, despite the BBC's desperate efforts to make it a defining issue. Harriet Harman and Ed Balls have never had so many free hits - to little effect in my opinion. This is because the general public are not daft (nothing like as daft as a few backbenchers it seems). From an economic perspective, I reckon the downgrade will not have any significant impact on interest rates at which the UK borrows money (which is what matters) - and the downgrade was factored into the market already.

But from a political perspective its a different matter. In the febrile atmosphere of Westminster it does matter, partly because commentators can come up with various quotes that a downgrade was not going to happen. MPs are very excitable people. We are likely to find out more about what it all means in the lead-in to the budget, and reaction to the budget itself. In interviews with the Welsh media, I've resorted to the 'hindsight' approach. With hindsight, our focus should have been on our commitment to ensuring lowest possible interest rates in the markets, rather than the credit rating which delivered it. The reality is that its not going to make any significant difference. This approach seems to works - mainly because its true.

But please don't think I'm at all dismissive about the state of the UK economy. The Institute of Fiscal Studies reckons the 2012/13 deficit will add another £128 billion to the National Debt, which  will reach around £1.6 trillion by 2016. It was not much over £300 billion in 2000, and not much over £500 billion in 2008. The Coalition Gov't inherited one hell of a mess, and its a long steep road to stable ground. As it is, we are in the midst of the biggest Keynsian cash splurge ever seen in living memory (and beyond). I have four children and two grandchildren, whose contemporaries will have to repay these mind blowing debts. We are probably the most selfish generation in the human history of our nation. And always the questions keep coming asking about a Plan 'B' or "Kick starting the economy to create growth" - meaning even more borrowing. I'd like to see tax cuts myself but it cannot be without more cuts in public spending, particularly welfare spending. And we are finding out just how hard that is in a Coalition.

Another reason why we are a selfish generation is that we seem happy to allow devaluation of our currency - the inevitable consequence of the mega-money that the Bank of England has been printing. It just means that we are devaluing the savings that we should be using to help future generations to repair the damage. If we had fixed exchange rates, what has happened over recent months would have put us in devaluation territory. As it is we may find Sterling depreciation a difficult animal to control. Its a b*****y good job I'm a hill sheep farmer. I'm sure I'd be as terribly worried if I was an economist. One consolation is that at least my family owns a bit of land.