The British government yesterday rejected a warning from the European commission that it will fail to cut its deficit in accordance with EU rules.
According to British media, leaks the commission is set to warn that the UK will not meet the 2014-15 deadline for reducing its budget deficit to below 3 per cent of its national output.
But commenting BBC’s Radio 4 yesterday, Liam Byrne, the chief secretary to the Treasury, insisted that the EU assessment was “wrong”.
The suggestion that Britain had to find another GBP20bn of cuts by 2014-15 was “too aggressive” and could cause “irreparable damage” to public services, Byrne added.
The draft EU report, due to be approved by the commission but leaked to the news agency Reuters, warned: “A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned.”
The headline findings are likely to stoke what has become the pivotal political row between the two main parties ahead of next week’s budget, and the subsequent general election campaign.
The report added: “The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced.”
Byrne told stressed that the scale of cuts proposed by Europe to reduce the budget deficit to below 3 per cent of national output were equivalent to halving the education budget, or raising GBP20bn more in taxes on top of the 50p tax rate for high earners due to be introduced next month and the ½ per cent rise in national insurance that is coming in next year.
He said: “We think that the EU has got the judgment wrong. We think the plan they have set out would require us to take out GBP20bn more out of the economy by 2014-15 and we believe that would do irreparable damage to public services or to taxpayers.”
Under chancellor Alistair Darling’s current proposals, the gap between spending and taxes would be reduced to 4.7 per cent of gross domestic product, but the commission said that even this target might be missed as a result of weaker growth than the Treasury is expecting.
Byrne said: “We think that halving the deficit over four years is the right approach. It’s not reckless. It’s not painless either. What we have done is set out the clearest plans of G7 [countries] to deliver on that goal.”
