The European Commission’s recommendations for UK macroeconomic policy

The Commission today published its “country-specific” economic policy recommendations.  The UK ones are here. There are number of generally very sensible, if somewhat bland and unspecific, supply-side suggestions (liberalise planning to increase housing supply, introduce a “Youth Guarantee” to address youth unemployment:).  But it was the recommendation on fiscal and budgetary policy that caught my eye (it is Recommendation 1, after all). Here it is in full: 

HEREBY RECOMMENDS that the United Kingdom should take action within the period 2013-2014 to:

 

1. Implement a reinforced budgetary strategy, supported by sufficiently specified measures, for the year 2013-14 and beyond. Ensure the correction of the excessive deficit in a sustainable manner by 2014/15, and the achievement of the fiscal effort specified in the Council recommendations under the EDP and set the high public debt ratio on a sustained downward path. A durable correction of the fiscal imbalances requires the credible implementation of ambitious structural reforms which would increase the adjustment capacity and boost potential growth. Pursue a differentiated, growth-friendly approach to fiscal tightening, including through prioritising timely capital expenditure with high economic returns and through a balanced approach to the composition of consolidation measures and promoting medium and long-term fiscal sustainability. In order to raise revenue, make greater use of the standard rate of VAT.

A Member State which has taken effective action to address its excessive deficit, but where the impact on the public finances has been affected by exceptional events outside its control, may see an extension of its deadline for correction and a revision of the recommendations to reflect the change in circumstances.