Thursday

28th Mar 2024

EU to reprimand UK spending

  • Britain is not part of the eurozone but has signed up to respect the EU's basic budgetary rules (Photo: EUobserver)

The European Commission is set to trigger legal action against the UK over an excessive budget deficit, pressing London to cut the deficit below the EU's 3 percent of GDP limit by March next year.

But the legal action would amount to no more than a public reprimand as EU fines in this area are limited to eurozone members.

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In a draft report to be adopted on Wednesday (11 January), seen by EUobserver, the commission concludes that "an excessive deficit exists in the United Kingdom," and suggests that the British authorities take effective steps by this July to reduce it.

The document projects that the UK's budget deficit will reach 3.2% of GDP in the financial year 2004-5, 3.4% in 2005-6 and 3.2% in 2006-7.

It highlights that the breach of the EU deficit ceiling is neither "exceptional" nor "temporary," which would allow London to avoid Brussels' action, according to the bloc's rules.

The move is likely to boost political pressure against UK finance minister Gordon Brown and his economic policy, criticised for the country's growing public debt and deficit.

The leader of the British conservative MEPs Timothy Kirkhope had earlier attacked Mr Brown for presenting more favourable statistics in the past.

"The chancellor spins himself as a prudent man but even the European Commission is showing him up as a reckless spender," he said, stressing that such a policy could prove especially harmful if the UK's economic growth begins to slow down.

Rules apply beyond the eurozone

Britain is not a member of the eurozone, and so it does not face potential financial sanctions for breaking the EU's budgetary rules.

However, according to the bloc's treaties the UK is bound "to endeavour to avoid excessive deficits" and to respect the debt and deficit ceilings.

In the document, the EU executive points out that "overall growth performance in the UK remains reasonably satisfactory" and its authorities will have to make just "modest" improvements in the budgetary plan, so the deadline for the effective action is within about one year from the start of the formal EU procedure.

The commission's recomendations will have to be approved by the finance ministers, possibly at their meeting on 24 January.

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