The Official Journal of the European Union, OJEU, published on September 5th a Council Decision on the existence of an excessive deficit in the United Kingdom. This Decision comes after an overall assessment of the economic situation in the UK, and is based on the excessive deficit procedure (EDP) to ensure that Member States avoid excessive government deficits or that they correct such deficits when they occur.

Taking into account its report in accordance with Article 104.3 of the Treaty and having regard to the opinion of the Economic and Financial Committee in accordance with Article 104.4, the Commission concluded that an excessive deficit exists in the United Kingdom. The Commission therefore addressed such an opinion to the Council in respect of the United Kingdom on 2 July 2008.

In this review of the situation, the Commission concluded that the United Kingdom undertook strong fiscal consolidation efforts during the late 1990s. Thereafter, the government adopted a looser fiscal stance, mainly as a result of an explicit policy objective to raise expenditure on public services. As a result, the general government balance moved from a surplus position in the late 1990s to a deficit of 3,2 % of GDP in 2003/04 and 3,5 % in 2004/05.

According to the EDP data notified by the UK authorities in March 2008, the United Kingdom's general government deficit in 2008/09 was planned to reach 3,2 % of GDP, thus exceeding the 3 % of GDP reference value. The excess over the 3 % of GDP reference value is not exceptional in the sense of Article 104.2 of the Treaty. In particular, it does not result from an unusual event outside the control of the United Kingdom authorities, nor is it the result of a severe economic downturn.

The Commission services' spring 2008 forecast projects UK growth to slow in 2008 and 2009 to annual rates below potential. Nevertheless, GDP growth is expected to reach 1,7 % in 2008 and 1,6 % in 2009. The excess over the 3 % of GDP reference value is also considered not temporary, with the Commission services forecasting. This indicates that the Treaty requirement concerning the deficit criterion is not fulfilled.

On February 2008, the Council examined UK's convergence programme and already observed that although UK's economy had displayed robust and remarkably stable growth over the last ten years, this had been accompanied by a deterioration in the general government deficit in the current financial year, 2007/2008.

Excessive Deficit Procedure (EDP)

The Excessive Deficit Procedure under Article 104 of the Treaty, which is part of the Stability and Growth Pact, provides for a decision on the existence of an excessive deficit. The Protocol on the excessive deficit procedure annexed to the Treaty sets out further provisions relating to the implementation of the excessive deficit procedure. Council Regulation (EC) No 3605/93 (2) lays down detailed rules and definitions for the application of the provision of the said Protocol.