Chancellor George Osborne insisted that the Government was delivering on its commitment to tackle the UK’s debt problem after ratings agency Moody’s downgraded the country’s AAA credit rating.

Mr Osborne said the Government would not change course in the wake of the move, which Shadow Chancellor Ed Balls described as a “humiliating blow”.

Mr Balls accused his opposite number of “ploughing on regardless with a plan which is not working”.

But the Chancellor said “our situation would get very much worse” if the Government abandoned efforts to reduce the UK’s debt mountain.

In an interview at 11 Downing Street, Mr Osborne said: “I think we’ve got a very clear message, a loud and clear message that Britain cannot let up in dealing with its debts, dealing with its problems, cannot let up in making sure that Britain can pay its way in the world.

“What is the message from the ratings agency? Britain’s got a debt problem. I agree with that. I’ve been telling the country for years that we’ve got a debt problem, we’ve got to deal with it.

“What do they also say? That if we abandon our commitment to deal with that debt problem, then our situation would get very much worse and I’m absolutely clear that we must not do that.”

Asked if he had broken his commitment to protecting Britain’s credit rating, he said: “I’ve consistently argued that Britain has a debt and deficit problem, that we’ve got to tackle that head on, that we’ve got to take tough measures to do that and I think people understand that.

“In the end, the test of our credibility as a country is there every day in the markets when we borrow money on behalf of this country from investors all around the world.

“At the moment we can do that very cheaply with very low interest rates precisely because people have confidence that we have got a plan, we’ve got to stick to that plan and we are going to deliver that plan.”