Britain’s AAA credit rating threatened by scale of bank bail-out
The news just goes on getting worse… and worse. Britain could be stripped of its prized AAA credit rating as a result of the Government’s latest bank bail-out, potentially jeopardising any economic recovery, according to rating agency Standard & Poor’s.
S&P only last month confirmed its “stable outlook” for the country’s sovereign debt but may now be forced to review the top-notch rating. The change has been prompted by the Government’s asset protection scheme – insurance for toxic debt – which will leave the taxpayer exposed to losses on billions of pounds of bad loans made by the banks.
A downgrade would be calamitous for the country, which is on course to borrow an extra £500bn over five years, taking the national debt above £1 trillion for the first time. Should the UK lose its AAA rating or even be put on “negative watch”, the country’s interest bill would soar – putting further strain on the economy. A ratings downgrade or a shift to “negative watch” could be devastating for the Government’s planned economic stimulus package.
It all comes down to one of the underpinnings of the body of theory from which LVT emerges. Land is not wealth.