Britain will not stray from debt-cutting plans - Osborne

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"Here is yet another organisation, in this case a credit rating agency, warning Britain that if we spend or borrow too much we're going lose our credit rating ... what that leads to potentially is a loss of investor confidence in our economy and then people don't invest in our economy you don't get growth and you don't get jobs."

"If you don't deal with your debts, you will not have growth," he added.

Britain's Conservative-led coalition government has embarked on tough debt-cutting measures aimed at eliminating a budget deficit that was more than 10 percent of GDP when it came to power two years ago.

However, it has already been forced to admit that achieving this aim will take longer than it expected due to a weaker growth outlook.

Many economists have argued against the government's position that austerity can boost growth, urging it to soften its stance to protect the economy from a sharp downturn in the euro zone, which is Britain's biggest trading partner.

"This is not a vote of confidence in what is happening in Britain because, as I have said consistently and in the face of the views at times of ratings agencies, is that without growth, without jobs, you can't get the deficit down," said Labour's finance spokesman Ed Balls.

NO BUDGET GIVEAWAYS

Economists said the Moody's action would only serve to strengthen the government's resolve and made it very unlikely there would be any giveaways in the March 21 Budget.

"The decision is likely to reinforce the Government's commitment to its deficit-cutting measures and perhaps makes a loosening in next month's Budget even less likely than it already was," said Vicky Redwood of Capital Economics.