Government plans to deal with Britain’s ballooning debt are not ambitious enough and need to be “significantly reinforced”, according to a European Commission report.
In a blow to Gordon Brown’s economic strategy, the Commission is warning the UK may not cut its deficit in line with EU rules by a deadline of 2015.
Its economic health report, due out tomorrow, also questions Treasury forecasts for the UK’s economic growth over the coming years, saying they could be optimistic if the global economy fails to grow as strongly as expected.
The warnings come ahead of the Government’s critical pre-general election Budget next week, and figures out later this week that will show whether this year’s UK deficit will be worse than the £178 billion forecast last year.
The Government has pledged to halve this over four years, but not set out in detail how the reduction will be achieved. It is likely to be the biggest electoral battleground over the coming weeks.
The European Commission’s leaked report states: “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.”
The report will be published once it has been endorsed by a meeting of the Commissioners.
A senior EU official said last night: “The message from the Commission will be that the UK needs to get its house in order.”
Shadow chancellor George Osborne seized on the Commission’s verdict to attack Government policy.
“This is a heavy blow for Gordon Brown’s credibility,” he said.
“The Conservatives have been arguing that we need to reduce our record budget deficit more quickly in order to support the recovery.
“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.”
A Treasury spokesman said the Government has set out a plan to halve the deficit in four years - the sharpest deficit reduction plan in the G7, backed by legislation.
“The Chancellor’s judgment on the pace of this adjustment takes into account the need to support the economy through the early stages of the recovery, as well as uncertainty around prospects for the public finances, resulting from the exceptional nature and strength of the global downturn,” said the spokesman.
“As the Chancellor has made clear, to withdraw support earlier and at the wrong pace risks wrecking the recovery - a judgment supported by the Commission.”
In December, Mr Darling said the economy was on course to record growth of between 1% to 1.5% in 2010/11, before surging ahead to 3.5% the year after.
As a non-eurozone nation, the UK cannot be sanctioned for breaching single currency deficit and debt guidelines.
But the Commission is to make clear the Government is expected to comply with an EU deadline of 2014-15 for getting the deficit below the maximum 3% of GDP allowed under economic stability rules.
EU finance ministers set deadlines last year for reining in the UK public deficit, but latest figures forecast a reduction to 4.7% of GDP in 2012-2015 - the deadline set for getting back within 3%.
The Commission report says even this shortfall could be worse if economic growth turns out to be worse than predicted by the Treasury.
In recent weeks the pound has dropped in value amid predictions of a hung parliament in the UK, which have prompted fears action to tackle the country’s deficit may be delayed.