UK budget deficit eases but still among highest in EU

Murdo Fraser said the study showed the need for the coalition's deficit-reduction programme. Picture: Submitted

Only debt-ravaged Spain, Ireland, Greece and Portugal spent higher percentages of their gross domestic product (GDP) on deficit repayment last year.

However, the UK’s position compared with other nations improved on that of 2009, when only Ireland and Greece fared worse.

The figures from Eurostat, the EU’s statistics office, showed that the UK saw its deficit fall as part of a European-wide trend last year.

Budget deficit made up 6.3 per cent of the UK’s annual GDP last year, compared with a figure of 11.5 per cent in 2009.

However, Britain was lagging behind nations such as Germany, France, Italy and the Netherlands, which all continued to outperform the UK.

Spending cuts and tax increases have helped to reduce deficits across the 17 countries that use the euro, as well as in the EU as a whole.

The UK Treasury insisted that its deficit-reduction programme would deliver further improvements. A spokeswoman said: “Though it is taking time, we are fixing this country’s economic problems.

“The deficit is down by a third, a million and a quarter private-sector jobs have been created and the credibility we have earned means households and businesses are benefiting from near record low interest rates.”

Greece, Ireland, Spain and Portugal all had worse deficits rates than the UK last year, according to the Eurostat figures.

Deficit accounted for 10.6 per cent of Spain’s GDP, 10 per cent in Greece, 7.6 per cent in Ireland and 6.4 per cent in Portugal.

Overall in the eurozone, the deficit dropped to 3.7 per cent of GDP in 2012, compared with 6.4 per cent in 2009. The figure fell from 6.9 per cent to 4 per cent in the EU as a whole.

Germany – Europe’s biggest economy – posted a €4.1 billion budget surplus in 2012, with a surplus of 0.2 per cent – a dramatic improvement on the 3.1 per cent the nation’s deficit made up of its GDP in 2009.

Estonia and Sweden had the lowest government deficits of all 27 EU member states last year in terms of their deficits as a percentage of the nation’s GDP, with figures of 0.3 per cent and 0.5 per cent respectively.

France saw its debt as a share of GDP drop from 7.5 per cent to 4.8 per cent between 2009 and 2012, while Italy went from 5.5 per cent to 3 per cent.

Tory MSP Murdo Fraser, Holyrood’s economy committee chairman, said the study showed the need for the coalition’s  deficit-reduction programme.

Mr Fraser said: “These latest figures demonstrate the progress that the UK government is making in reducing the deficit, that was created by the previous Labour government.

“While this good progress has been made, these figures make clear there is still a long way to go to address the whole of Labour’s horrendous debt legacy. We have to do much more to reduce levels of spending.”

But SNP MSP John Wilson said the UK’s high debt levels showed the Tory-Lib Dem government’s programme of austerity had failed.

He said: “At a time when we should be looking to grow the economy, the UK government continues to penalise the public sector and those on benefit.

“The real affect of the austerity measures will be to force more and more families into poverty.”