The Commission strikes again on UK budgetary control

News @ European Commission. On 11 June, the European Commission adopted a report according to Article 104 (3) of the EC Treaty, to initiate the excessive deficit procedure for the United Kingdom. The European Commission adopted the report following the UK notification, in March 2008, of a planned deficit of 3.2 per cent of GDP in financial year 2008-09, which is above 3 per cent of GDP – the Treaty reference value.

The Commission has stressed that the planned figure for 2008-09 provides evidence of the existence of an excessive deficit in the UK which was confirmed by the spring forecast. The Commission has accepted that the planned deficit is close to the reference value and has concluded that the UK’s planned excess over the deficit over the reference value cannot be qualified as exceptional within the terms of the Treaty and the Stability and Growth Pact, or temporary. Therefore the Commission has suggested that the UK is not respecting the deficit criterion established in the Treaty. Hence, the Commission has issued a warning for the UK to keep the budget deficit under the 3 per cent GDP level.

The UK is therefore under EU pressure to improve its finances. The Commission has already warned that tax cuts would further sprain public finances. Consequently, Alistair Darling might raise taxes to reduce the deficit. The initiation of the excessive deficit procedure against the UK though would not lead to financial sanctions if the UK does not follow the recommendations but it raises doubts over Alistair Darling’s management of public finances. The report will be assessed by the Ecofin Council.

On 5 June, the European Commission has also lodged a formal complaint to the ECJ against the UK for alleged failure to comply with European employment legislation relating to road transport activities. According to the Commission, the UK has not informed it of its national measures transposing Directive 2006/22/EC which regulates the controls that Member States have to carry out in order to ensure compliance with rules on driving time and rest periods. Member States were required to adopt the necessary legislation before 1 April 2007. Moreover, the Commission has also sent a reasoned opinion against the UK for alleged failure to fully transpose Directive 2005/45/EC into national law on the mutual recognition of seafarers’ certificates issued by the Member States. Member States had until October 2007 to transpose the Directive. It is aimed at encouraging mobility of seafarers within the European Union. The UK will have to adapt its national legislation on maritime transport if it does not want to find itself before the ECJ.

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