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EU calls for action on UK deficit EU calls for action on UK deficit
(about 1 hour later)
The government's plans for reducing the budget deficit are not ambitious enough - according to a European Commission report to be published later this week.The government's plans for reducing the budget deficit are not ambitious enough - according to a European Commission report to be published later this week.
The report warns that the UK is not on course to cut its deficit in line with EU rules by a deadline of 2015.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.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.Ministers insist their plans to halve the deficit in four years are less likely to halt the economic recovery.
Last year EU finance ministers gave members the 2015 deadline to bring their budget deficits in order. 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.
Target missed Shadow chancellor George Osborne called the report "a heavy blow for Gordon Brown's credibility".
But current government plans to half the deficit in four years - announced in last year's pre-Budget report - would see the UK miss that target. But in the run-up to next week's Budget, the 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.
In the run-up to next week's Budget, the Chancellor, Alistair Darling, has defended the government's approach to the deficit, arguing that cutting it too quickly by reducing government spending would harm the UK's fragile economic recovery. Fragile recovery
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 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.
"To withdraw support earlier and at the wrong pace risks wrecking the recovery - a judgement supported by the Commission."
But 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.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.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.
Shadow chancellor George 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."