Govt told by European Commission it must cut budget deficit

Tuesday 16th March 2010

The British government must do more to cut its £178 billion budget deficit, a report by the European Commission has said in a pre-general election blow to Labour.

The document, which will be published tomorrow, is reported to state that Gordon Brown's economic strategy is not ambitious enough and will mean the UK fails to cut the deficit in line with EU rules by the 2015 deadline.

The warning from the leaked report also says that the Treasury's forecasts for growth are too optimistic.

The deficit, which is expected to hit £178 billion, will be key to chancellor Alistair Darling's pre-general election Budget report, due next week.

The leaked draft from the commission reads: "The fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced.

"A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned."

In an interview with the BBC, chief secretary to the Treasury Liam Byrne said the report was "wrong" and would mean £20 billion more in spending cuts.

Liberal Democrat Treasury spokesperson Vince Cable commented: "The government's position on the size of the structural deficit and the speed at which it must be cut is the minimum.

"We must not cut government spending too soon and risk plunging a fragile recovery back into recession.

"Cuts without economic growth will not deal with the deficit.

"To be credible all parties must not only show when they will tackle the deficit, but also what they will cut."

Labour's plans, announced in the pre-Budget report, would see the UK's deficit reduced to 4.7 per cent by 2015. The Conservatives meanwhile have said if they were elected into government a much tougher approach would be taken into how the budget was dealt with.

"This is a heavy blow for Gordon Brown's credibility," shadow chancellor George Osborne said.

"The Conservatives have been arguing that we need to reduce our record budget deficit more quickly in order to support the recovery.

"Our argument is backed by credit rating agencies, business leaders, international investors and now the European Commission."

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