EC attacks Labour's economic policy

Published on Tuesday 16 March 2010 22:03

THE UK government's economic policy was described as being in disarray last night as ministers responded to criticism of Britain's credit rating by the European Commission.

EU commissioners had warned that Labour ministers were not doing enough to tackle Britain's debt and suggested that proposed cuts of 19 billion should be more than doubled to 39bn.

Their remarks appeared to play into the hands of the Conservatives whose central accusation against Labour is that Britain will lose its triple A credit rating if Gordon Brown wins the election.

If this were to happen the cost of government borrowing would soar leading to more public spending cuts and tax rises, while the cost of personal and business loans would also rocket.

The issue has put more pressure on Alistair Darling with his Budget just a week away, after he had insisted over the weekend that there would be no more cuts. And yesterday morning the Chief Secretary to the Treasury, Liam Byrne, who has ruled out more tax rises, said the EU commissioners' "judgment was wrong".

He said that adding 20bn to cuts would "do irreparable damage" to the UK economy. But the Tories then produced a dossier suggesting that Mr Byrne had performed a U-turn for the government. This included quotes by Mr Brown previously praising the European Commission, supporting its judgments and calling for international co-operation.

Conservative shadow Treasury chief secretary Philip Hammond seized on the European Commission's criticism of the government's strategy for dealing with the deficit, claiming Labour still had "its head buried in the sand".

But the Chancellor then accused the Tories of "jumping on a passing European bandwagon" to attack the government over the budget deficit. "The European Union must concentrate on getting deficits down – and make sure we can achieve sustainable recovery," said the Chancellor after talks in Brussels with fellow EU finance ministers.

"My judgment is that this is the right thing to do, and that judgment is shared by many economic commentators: the commission advice is wrong."

He said the Conservatives would have to find 25bn extra if they were prepared to follow the commission's approach, adding: "The Tories have jumped on a passing bandwagon, and, unusually for them, it happens to be a European one."

Meanwhile, in Scotland, question marks were being raised over the effectiveness of UK government help for business north of the Border.

The Conservatives put out a claim that almost 7m had been spent giving just five companies help in Scotland for the government's "real help for business now" scheme. But Labour claimed that the Tory figures were "misleading" and that 17,400 companies had been helped mostly by being allowed to defer corporation tax and pointed out that the capital part of the scheme had seen Scotland get more than its Barnett share of 7m from 33m.