UK credit rating downgrade: Osborne v Balls

Despite a lot of anticipation, the financial markets today have not reacted with horror to Moody's late night Friday downgrade.

Certainly pressure has been building on Sterling for some time. But there were no violent swings today.

There was however a political punch up in the House of Commons between the Chancellor and his opposite number, Ed Balls.

Unusually both men actually agree, at least today, that the ratings agencies' verdicts don't matter that much.

So the debate quickly turned into a slanging match over who is right on the economy.

The Chancellor answers an urgent question on the loss of the UK's prized AAA credit rating. Credit: PA Wire

For the Chancellor, again and again he said the economy's in such a state because of the hefty debts the coalition inherited from Labour.

For Ed Balls, again and again he claimed the problems should be laid at George Osborne's door for cutting the government's spending too fast, cutting off any chances of the economy growing.

It was certainly embarrassing for George Osborne to have his own quotes hurled at him, his claims that protecting the credit rating was make or break.

Labour MP, Pat McFadden had particular fun asking if Osborne now "agreed with himself that losing the credit rating would be a national humiliation."

Osborne has not met the pledge he himself made, and it rings slightly hollow for him now to claim the agencies don't matter.

Ed Balls refers to a copy of the Tory manifesto as he attacks George Osborne's economic record. Credit: House of Commons

No surprise then that his arch rival, Ed Balls, deployed that embarrassment to his advantage.

He clearly enjoyed the opportunity to wave around the Conservatives' election manifesto that contained the promise to keep the AAA as a measure of the economy's credibility.

But although political pressure is building on the Chancellor as the Budget approaches he is helped by one important factor.

It is not just that Moody's themselves said our economy is a less safe bet but the government's commitment to cuts is correct.

It's not just that the markets have not today slid dramatically.

But crucially his critics, whether Labour, Liberal Democrat or his own backbenchers do not agree on what he should do instead.

He still shows no sign of moving from the approach he has taken so far, and the downgrade shows no sign of making him shift.