UK faces EU warning

BRITAIN faces a rap from the European Union later this week and the government will be warned progress on improving the economy must speed up.

An EU report, which will not be welcomed by the Treasury, says efforts to take the UK budget deficit down to limits set by Brussels for single currency countries may not be good enough to meet an EU ultimatum for complying with the rules.

As a non-eurozone nation, the UK cannot be sanctioned for breaching single currency deficit and debt guidelines. But in an economic health report on the UK due out tomorrow, the commission makes clear the government is expected to comply with an EU deadline of 2014-15 for getting the deficit below the maximum 3 per cent of GDP allowed under economic stability rules.

A senior EU official said last night: "The message from the commission will be that the UK needs to get its house in order".

The report will be published once it has been endorsed by the commissioners tomorrow. They are expected to nod through a draft document, which calls for extra "fiscal tightening" by Chancellor Alastair Darling if a "credible" timetable for restoring sustainable public finances is to be met.

A Treasury spokesman said last night the government had 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," said the spokesman.

Shadow chancellor George Osborne seized on the commission's verdict, saying: "This is a heavy blow for Gordon Brown's credibility."