GEORGE OSBORNE attempted to play down the impact of the UK's loss of its AAA credit rating and said he would redouble efforts to cut the deficit.

The Chancellor said he would not be swayed from the Coalition Government's economic Plan A, despite Friday's humiliating decision by the rating agency Moody's which had warned the UK economy would struggle to grow for years.

The markets reacted badly, with the pound ending the day worth about $1.5105, down 1.5 cents on the previous close, and down a similar amount against the euro, with one pound equal to about €1.1439.

Labour accused Mr Osborne of being in denial over the scale of the UK's economic problems.

Former Chancellor Ken Clarke, added to Mr Osborne's woes by claiming it would be years before the UK regained the AAA rating.

And while Downing Street attempted to brush aside concerns about the loss of the rating, the Prime Minister's official spokesman would not be drawn on whether or not the Coalition was confident that there would be no further downgrades.

Amid heated scenes in the House of Commons, the Chancellor was greeted with shouts of "resign" from the opposition benches.

However, Mr Osborne set out his intention to stick to his plan.

Mr Osborne said that while the UK's credit rating was an important benchmark of economic credibility, it was simply one test among many.

He said: "This Government's economic policy is tested day in and day out in the markets, and it has not been found wanting today."

Labour's shadow chancellor Ed Balls attacked Mr Osborne over the downgrade, and said the Government was now besieged by calls from left and right to change course.

He said: "The Chancellor spent the last year saying 'I must stick to my plan to keep the AAA rating'. Now it's clear his warnings of disaster, of rising interest rates, of market mayhem if we downgraded, have not come true. What other excuse does he have for sticking to the plan?"

"The Chancellor needs to get out of his denial and get a new plan on growth, jobs and the deficit that will actually work, or else the Prime Minister will need to get a new Chancellor."

Mr Osborne pledged to redouble efforts to cut Britain's deficit, and described the downgrade as a stark reminder of the problems faced by the country.

He said: "We can either abandon our efforts to deal with our debt problems and make a difficult situation very much worse, or we can redouble our efforts to overcome our debts, make sure this country can earn its way in the world, and provide for our children a very much bright economic situation than the one we inherited from our predecessors."

David Cameron's official spokesman insisted the Government's economic plan was working and the Prime Minister was committed to seeing it through.

He said: "The plan is working and that is why we believe the economy is healing."

Asked how Mr Cameron viewed the loss of the UK's AAA status, the spokesman replied: "As the Chancellor said, it is a very clear message that Britain as a country cannot let up on dealing with its debts and demonstrating that it can and will pay its way in the world.

"It is a reminder the UK has a very significant debt and deficit problem, one that this Government is committed to continuing to tackle and deal with. We have a clear plan for doing that."