On Feb. 13th of this year, Moody’s changed the rating outlook on the UK’s Aaa rating from Stable to Negative. Moody’s said at the time that:
“A combination of a rising medium-term debt trajectory and lower-than-expected trend economic growth would put into question the government's ability to retain its Aaa rating. The UK's outstanding debt places it amongst the most heavily indebted of its Aaa-rated peers, alongside the United States and France whose Aaa ratings also carry a negative outlook.”
On Nov. 14th, Moody’s stated that:
“We will need to assess the Aaa rating and negative outlook in the first few months of 2013, in light of what the government’s Autumn Statement reveals about the [government’s] assurances that the debt trajectory will stabilise and start to decline within the rating horizon.”
On Dec. 5th, HM Treasury published its Autumn Budget Statement which provided revised projections for government revenue, expenditure, borrowing requirements and debt trajectory for 2013-18. The UK Office for Budget Responsibility analyzed these projections and compared them with the coalition government’s 2010 “fiscal mandate”.
The OBR concluded as follows:
"We now expect Public Sector Net Debt (PSND) to peak at 80% of GDP in 2015-16, compared to a peak of 76% of GDP in 2014-15 in our March forecast. PSND is pushed higher as a share of GDP by weaker nominal GDP growth, higher net borrowing, and technical asset reclassifications. The Government now appears more likely than not to miss its ‘supplementary target’, which requires PSND to fall as a share of GDP between 2014-15 and 2015-16. We now predict that PSND will rise by 1% of GDP in 2015-16, falling by 0.8% a year later. In the absence of the reclassifications, we estimate that PSND would be stable as a share of GDP between 2015-16 and 2016-17, and then fall in 2017-18."