UK’s European budget shame
BRITAIN has the third biggest budget deficit in Europe and the Government is borrowing even more than Greece, official figures showed yesterday.
The UK racked up a deficit of 5.7pc of gross domestic product last year while the national debt soared to 89.4pc of national income, according to Eurostat.
Cyprus and Spain were the only countries in the European Union to borrow more as a proportion of national income – underlining the British government’s abject failure to live within its means.
Governments are forced to borrow money if they spend more on public services and other areas such as welfare than they earn in tax receipts.
Even crisis-torn Greece ran a smaller deficit than the UK last year – as did other debt-riddled countries including Ireland, France, Italy and Portugal.
Philip Shaw, economist at Investec, said: ‘ The fact that the UK is borrowing more than Greece as a proportion of its economy shows the extent to which more work is need to get the deficit down. The Government has done well so far, but the job is not finished.’
Britain has been running a deficit since then Labour chancellor Gordon Brown started splashing out at the turn of the century.
The deficit hit a record £153bn in 2009-10 as Labour lost control of the public finances in the Great Recession. It fell to £90bn last year under the Coalition but the report from Eurostat underlines the scale of the challenge facing the next government to balance the books.
The report also highlights just how risky it would be for whoever wins power to relax austerity and increase public spending – as planned by Labour and the Scottish National Party.
The Tories have promised to return Britain to the black in 201819 and run the country’s first surplus since 2001.
But Labour has failed to match the pledge and could still be borrowing around £30bn a year by the end of the decade.
The SNP, meanwhile, has gone even further, with Nationalist leader Nicola Sturgeon pledging ‘an end to austerity’ and demanding a £148bn spending spree.
Howard Archer, economist at IHS Global Insight, said: ‘Getting the deficit down remains very much a work in progress. For all the promises being made by the various political parties ahead of the General Election, the fact is that getting the budget deficit down will have to remain a priority.
‘The still substantial deficit highlights that there cannot credibly be an end to austerity – whatever the SNP may argue.’
The UK had the ninth largest debt pile in the EU last year as a proportion of GDP, according to Luxembourg-based Eurostat.
The national debt built up over the years has soared to £1.5trillion and is due to top £1.6trillion in the coming years – or £64,000 per household in Britain.
Government debt in the eurozone hit a record 91.9pc of GDP at the end of last year – the highest level since the single currency was introduced in 1999.
Greece was the worst offender with debts of 177.1pc of national income followed by Italy at 132.1pc and Portugal with 130.2pc. Across the EU, 16 countries including Britain are in breach of the region’s 60pc debt limit.
George Osborne last week won praise from the International Monetary Fund as well as his German counterpart Wolfgang Schaeuble for his handling of the economy.
However, the Institute for Fiscal Studies has criticised the main parties for failing to outline exactly how they will get the deficit under control – leaving voters in the dark as they head to the ballot box next month.