(1)

According to Article 104 of the Treaty, Member States are to avoid excessive government deficits.

(2)

Pursuant to point 5 of the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland, the obligation in Article 104(1) of the Treaty to avoid excessive general government deficits does not apply to the United Kingdom unless it moves to the third stage of economic and monetary union (1). While in the second stage of economic and monetary union, the United Kingdom is required to endeavour to avoid excessive deficits, pursuant to Article 116(4) of the Treaty.

(3)

The Stability and Growth Pact is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation. The Stability and Growth Pact includes Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit procedure (2), which was adopted in order to further the prompt correction of excessive general government deficits.

(4)

The 2005 reform of the Stability and Growth Pact sought to strengthen its effectiveness and economic underpinnings as well as to safeguard the sustainability of the public finances in the long run. It aimed at ensuring that in particular the economic and budgetary background was taken fully into account in all steps in the EDP. In this way, the Stability and Growth Pact provides the framework supporting government policies for a prompt return to sound budgetary positions taking account of the economic situation.

(5)

By Decision 2008/713/EC (3) the Council decided, in accordance with Article 104(6), that an excessive deficit existed in the United Kingdom.

(6)

In accordance with Article 104(7) of the Treaty and Article 3(4) of Regulation (EC) No 1467/97, on 8 July 2008 the Council also, on the basis of a Commission recommendation, adopted a Recommendation (4) to the UK authorities calling on them to put an end to the excessive deficit situation as soon as possible and by financial year 2009/2010 at the latest, by bringing the general government deficit below 3 % of GDP in a credible and sustainable manner. To that end, the Council recommended the authorities to ensure a structural improvement of at least 0,5 % of GDP in 2009/10 and established the deadline of 8 January 2008 for the UK government to take effective action.

(7)

The assessment of the action taken by the United Kingdom to correct the excessive deficit by 2009/2010 in response to the Council Recommendation under Article 104(7) leads to the following conclusions:

(8)

This leads to the conclusion that, in a context of progressively weakening economic conditions, the UK authorities have since July 2008 implemented additional deficit-increasing discretionary measures in line with the European Economic Recovery Plan (EERP). The combined effects of the strong economic downturn and the stimulus measures adopted by the UK authorities have led to the substantial deterioration in the UK’s budgetary position projected for 2009/2010,