Commission set to criticise UK deficit

The Commission is set to take a dim view of the UK’s third year in a row with a deficit of over 3% of its GDP and may conclude, on 11 January, that the UK is in breach of the Maastricht Treaty and refer the matter to the Council.

If it concludes, on 11 January, that the UK is in breach of the Maastricht Treaty (which underpins the Stability and Growth Pact), the Commission will refer the matter to the Council. EU finance ministers are to discuss the UK budget on January 24, according to Bloomberg

In reality, member states can only recommend that the UK reduces its deficit below the 3% ceiling because, not being a member of the eurozone, the country is not subject to fines.

The Commission has looked on the UK’s ‘excessive public deficit’ for the last two years leniently, describing it as ‘temporary’, but patience is wearing thin and on 21 September it decided to launch the first phase of an ‘excessive deficit procedure’. 

In 2003-04 and in 2004-05, the UK deficit was 3.2% of GDP. According to the Commission’s latest forecasts, it will be as high as 3.4% in 2005-06 and stay above the 3% ceiling in 2006-07.

“The United Kingdom authorities should put an end to the present excessive deficit situation as soon as possible and by financial year 2006-2007 at the latest,” reads the Commission draft, according to Reuters.

“The government’s projections are fully consistent with a prudent interpretation of the stability and growth pact, while the UK continues to have the lowest average debts and deficits of any other major European economy since 1997,” said a spokesperson from the UK Treasury on 5 January, according to the Financial Times

The stability and convergence programmes for Denmark, Finland, Hungary, Czech Republic, Slovakia and Sweden will also be discussed by commissioners on 11 January.

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