The European Commission has given new recommendations to the UK to improve public finances

Last February, the European Commission presented its assessment of the updated Member States’s stability and convergence programmes. Following such assessment, on 24 March, the European Commission has taken steps under the excessive deficit procedure for France, Greece, Ireland, Spain and UK. The Commission has proposed deadlines for the correction of the budget deficits of Greece, Spain, France and Ireland as well as a new deadline for the correction of the excessive deficit in the UK.

It should be recall that last July the Council recommended the UK, on the basis of a Commission proposal, to bring the general government deficit below 3% of GDP by 2009/10. On 8 July, the Economic and Financial Affairs Council opened excessive deficit proceedings against the UK. Therefore, the UK is still in the excessive deficit procedure. However, the Commission has stressed that the UK’s budgetary position has rapidly deteriorated “on account of the sharper-than-expected economic slowdown and the deficit-increasing discretionary measures adopted by the UK in line with the European Recovery Plan.”

According to the UK's 2008 convergence programme, the deficit in 2009/10 is estimated to reach 8.2% of GDP however the Commission’s January forecasts foreseen an even “sharper contraction in economic activity” and predict a deficit in 2009/10 of 9.5% of GDP. The government gross debt ratio is expected to rise considerably to almost 70% of GDP.

The Commission has adopted a Recommendation for a Council Decision finding that the UK has taken no effective action in order to bring its excessive public deficit to an end by 2009/10, in response to the Council Recommendation of 8 July 2008. Moreover, the Commission recommended to the Council to adopt a new recommendation setting a new deadline of the 2013/14 financial year for the correction of the excessive deficit in the UK.

Hence, the UK was given until 2013/2014 to lower its deficit. The Commission has stressed “In order to achieve the correction of the excessive deficit by 2013/14 the government would have to step up the consolidation effort compared to what is envisaged in the 2008 update of the convergence programme.”

The European Commission recommendations still have to be approved by the Ecofin Council.

Although the UK will not be subjected to financial sanctions for excessive deficit, it is definitely under pressure to reduce its deficit.