Neil Collins writes in his Reuters column about Standard & Poor’s evaluation of the British economy’s “negative outlook”, the usual precursor to a downgrade of S&P’s rating of an issuer’s debt: As the rating agency’s reality check concludes: “A government debt burden [of nearly 100 percent of GDP] if sustained, would in S&P’s view be incompatible with an AAA rating.” Loss of that rating would lead to a higher cost of government borrowing, damaging the chances of avoiding the trap. Were the Labour administration not in total funk, it might seize on this report to admit that its spending plans are not sustainable. Capital projects, like the NHS IT scheme, ID cards, Crossrail, aircraft carriers, the Eurofighter and much else will have to go, and the next government will have to impose real cuts in the core spending of education, health and welfare. S&P’s warning shot shows that the phoney […]