Row over leaked EU deficit report

3/16/2010 01:32:00 PM

LONDON – The Labour government on Tuesday came under fire from opposition Conservatives as a leaked European Commission report suggested that its huge public deficit needs cutting faster than anticipated.

The Tories leapt on excerpts from the report, due to be published on Wednesday, suggesting that current plans were not ambitious enough.

"This is a heavy blow for Gordon Brown's credibility," said George Osborne, who would become Britain's finance minister if the Conservatives win a general election expected on May 6.

The EU commission report, leaked to British media, said: "The fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced.

"A credible timeframe for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned."

But Prime Minister Gordon Brown hit back, saying Britain would halve its deficit in the next four years and calling this "the most ambitious plan of any of the advanced countries for reducing our deficit".

"What we will not do is put the recovery at risk and the EU Commission is very clear that we should not have the fiscal stimulus removed until recovery is assured," he told reporters.

Finance minister Alistair Darling told Sky News television it would be "absolute madness" to remove fiscal support for the economy too soon.

Some experts have warned of a possible double-dip recession if public spending is cut too deep, too soon. Data out in January showed that Britain had edged out of its longest recession since World War II.

But Osborne insisted Britain's record deficit must be cut more quickly, saying: "Our argument is backed by credit rating agencies, business leaders, international investors and now the European Commission.

"That is why we need a change of government to restore confidence in our economy at home and abroad," he said.

Britain's state borrowing is expected to balloon to a record 178 billion pounds in the 2009/10 financial year.

The dire state of Britain's public finances is partly the consequence of multi-billion-pound banking bailouts in the wake of the financial crisis.

The public purse has also been hit by weak taxation revenues, which sank in the face of a fierce recession that ended in the final quarter of 2009.