Budget : EU calls for faster UK deficit cuts

The government's plans for reducing the budget deficit are not ambitious enough - according to a European Commission report to be published on Wednesday.

The report warns that the UK is not on course to cut its deficit in line with EU rules by a deadline of 2015.

Those rules say deficits must be below 3% of GDP, but the UK's is expected to hit £178bn - 12.6% of GDP - this year.

Ministers insist their plans to halve the deficit in four years are less likely to halt the economic recovery.

Those plans, announced in the pre-Budget report, would see the UK's deficit reduced to 4.7% by 2015 - missing the EU target outlined by finance ministers last year.

Fragile recovery

Shadow Chancellor George Osborne called the report "a heavy blow for Gordon Brown's credibility".

But in the run-up to next week's Budget, Chancellor Alistair Darling, defended the government's approach to the deficit, arguing that cutting it too quickly by reducing government spending would risk harming the UK's emergence from recession.

"The chancellor's judgement on the pace of this adjustment takes into account the need to support the economy through the early stages of the recovery," a Treasury spokesman said.

  The message from the Commission will be that the UK needs to get its house in order

EU spokesman
"To withdraw support earlier and at the wrong pace risks wrecking the recovery - a judgement supported by the Commission."

The Treasury said the government's plan was the sharpest and fastest deficit reduction proposal in the G7 leading industrial nations.

But the Liberal Democrats said that to be credible, parties needed to show what they would cut.

A draft of the Commission's report suggests that "additional fiscal tightening measures" beyond those already planned are needed if the health of public finances is to be restored "within a credible timeframe".

The report also calls into question the Treasury's forecasts for the UK's economic growth.

Its forecast of 2% growth in 2010-11, and then 3.3% growth for the next four years could prove optimistic, the Commission argues, should the global economy fail to recover as strongly as expected.

"The message from the Commission will be that the UK needs to get its house in order," an EU spokesman said.

Mr Osborne said a change of government was needed to restore confidence in the UK economy. He added: "The Conservatives have been arguing that we need to reduce our record budget deficit more quickly in order to support the recovery."

BBC political correspondent Ross Hawkins said the European Commission had walked "slap bang into the middle of an enormous political row".

He said the issue of whether to cut "sooner or deeper" would play "at the heart" of the forthcoming election as each parties' plans were scrutinised.

"All the competing parties say they've got the answer and their opponents are misreading the situation," he said.

The timing meant the topic had far greater impact than it would otherwise, he added.