Britain came under EU pressure today to improve its finances as the European Commission warned that London's public deficit was on course to breach European limits.
The European Union's executive arm opened an excessive deficit procedure against Britain, effectively a formal warning to rein in the gap between revenues and expenditure.
The commission said Britain would breach EU rules during the fiscal year ending March 2009 requiring member states to keep their public deficits to less than 3% of gross domestic output (GDP).
Figures provided by Britain in March suggested the deficit would hit 3.2%, while the commission has forecast 3.3% if London does not change its policies.
The commission warned that tax cuts announced in May would add further strain on the public finances, swelling the deficit to 3.5%. It also said that there was not a good reason to justify why the British public deficit was set to breach the EU limit.
'The United Kingdom's budgetary position has deteriorated over the past year and is expected to rise above the 3% of GDP reference value,' the EU Economic and Monetary Affairs Commissioner Joaquin Almunia said. 'In line with the treaty, the commission has therefore initiated the excessive deficit procedure,' he added.
Although Britain would face pressure from other EU countries to stick to the plan, it does not face the prospect of fines if it does not, as countries using the euro do when they find themselves in the same situation. Britain is a member of the European Union but not the euro zone.
