Prudence gets spanked
European Union finance ministers have voted to condemn Britain for flagrant breach of the Maastricht spending rules, irked that the UK government has not even tried to keep its budget deficit below the treaty limit of 3pc of national income.
By its own admission, Labour will need to borrow at least 3.2pc of GDP this year, even if the economy holds up well. ..(Fat chance of that)
..Britain's sins are serious. The breach has occurred at the top of the cycle when tax revenues should be at their peak. Brussels said there had been a "deterioration of the structural balance of 4.5pc of GDP" since 1999. Brussels said Britain did not qualify under the "exceptional" circumstances clause.
...The UK now has the worst fiscal profile of any developed country in the North Atlantic sphere.
The European Commission expects the UK's public debt to rise from 43.2pc of GDP last year to 47.5pc by the end of next year. The ritual of naming and shaming at EU meetings is likely to prove a constant thorn in the side for Labour.
There is no chance that the deficit can be brought back under control in the foreseeable future. The deficit always deteriorates in a downturn. Capital Economics said borrowing needs could explode to £120bn a year if the country tips into a severe recession, as many now fear.
Britain is now in an ugly predicament. Unlike Spain or the US, it cannot easily resort to a fiscal boost - either tax cuts or extra spending - to cushion the effects of the property collapse.
Remind me a gain who asked to be judged on his handling of the economy...