Europese Commissie start procedure na Brits begrotingstekort van 3,2 procent (en)

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The European Commission today adopted a report on the budgetary situation of the United Kingdom following notification by the UK authorities last month that the general government deficit reached 3.2% of GDP in the 2004/05 financial year. Under European Union rules, the Commission must draft a report when the 3% deficit limit is exceeded. As required by the Treaty, the Commission will wait for the opinion of the Economic and Financial Committee before making its opinion on whether the UK deficit is excessive and whether recommendations ought to be issued.

The United Kingdom reported last month^[1] a deficit of 3.2% of its Gross Domestic Product for the financial year 2004/5 (from April to March). This led the Commission to draft a report, according to Article 104.3 of the European Union Treaty.

This is the second consecutive year that the UK deficit is above 3%. In the financial year 2003/2004 it was also at 3.2% but, at the time, the Commission concluded, after consulting the Economic and Financial Committee^[2], that no recommendations were necessary since it was considered that the deficit was close to the 3% reference value set in the Maastricht Treaty and likely to be temporary.

The report adopted today by the Commission assesses the UK public accounts and indicates that the excess over the 3% cannot be explained by the economic situation as domestic GDP growth was above potential in the last two years (3.2% in 2004 and 2.9% in 2005). Although the deficit is close to the reference value, it has been above 3% for the past two years and may not be corrected in the ongoing financial year. The analysis in the report, therefore, suggests that the deficit criterion in the Treaty is not fulfilled by the UK. The Commission notes, however, that at 40.8% of GDP in 2004/5 the UK debt is well below the Treaty's 60% reference value.

In line with the Treaty, the report also examined "other relevant factors" such as the quality and sustainability of public finances. The analysis appears relatively favourable, but according to the Stability and Growth Pact such factors can only be taken into account if the principle that the deficit remains close to the reference value and is temporary is fully met.

According to Art 116(4) of the EU Treaty, the United Kingdom shall "endeavour to avoid excessive deficits" even though it has not adopted the euro.
The full report is available at:

http://europa.eu.int/comm/economy_finance/about/activities/sgp/edp/edpuk_en.htm
For details on the Stability and Growth Pact, see:

http://europa.eu.int/comm/economy_finance/about/activities/sgp/procedures_en.htm

Note

The UK general government deficit figure for 2004/05 of 3.2% of GDP reported above is around 0.1 percentage points of GDP worse than the ratio published by the UK authorities, who calculate the deficit after including annual receipts of around £1.0 billion accruing from the sale of UMTS licences in 2000. This practice is at variance with the decision of Eurostat on the treatment of such revenues. The UK's addition is therefore deducted by Commission services in order to bring the UK data onto a standardised European-wide basis.

^[1] Member States must report twice a year their deficit and debt figures for the past four years as well as their forecasts for the ongoing year (so-called March and September notifications). Eurostat is expected to publish a press release on 26 September giving the deficit and debt figures for all Member States in the last four years.

^[2] The EFC is composed of top government finance and central bank officials. It prepares the agenda of EU finance ministers meetings