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Tuesday, 3 June 2014

EC statement on policy recommendations to UK

An European Commission spokesperson said:

"In view of some of the press coverage and reactions to the Commission's proposed recommendations to the UK published yesterday, it seems important to clarify a few points.

First, the recommendations put forward yesterday are based on an assessment of the UK's own economic and budgetary plans, sent to the Commission and made public in April. They are not a diktat – they are proposed recommendations for consideration by EU leaders and finance ministers later this month. The Commission has proposed such recommendations for all EU Member States every year since 2011 as part of a joint effort to improve policy coordination among the EU’s interdependent economies, with a view to boosting competitiveness, growth and job creation. These are, rightly of course, also the key priorities of the UK Government.

The recommendations are based on a process and on economic priorities agreed by all EU members – including the UK.

Concerning the UK specifically, the Commission has noted that the country's deficit reduction efforts have so far focussed on expenditure cuts. We are not criticising this: spending reductions, provided they focus on current expenditure rather than capital investment, are generally less damaging to growth than tax increases. However, there is a limit to how much fiscal consolidation can be achieved through spending cuts alone.

As such, we consider it advisable for the UK to look at raising new revenues to meet its fiscal consolidation needs. This should be done in a fair and efficient way, which does not hamper competitiveness or increase poverty. That is why we consistently stress to all countries that increasing taxes on labour (income and corporate taxes) is not advisable.

Economic evidence shows that property taxes are amongst the most growth friendly – and that is why we have recommended that the UK consider adjusting its property taxation. This does not mean we are calling for a new "mansion tax" or anything similar. We are suggesting adjustments that would make the Council Tax system fairer for homeowners and more efficient in terms of government revenues.

Finally, it is worth noting that cadastral values in England have not been updated since 1991. Many other EU countries, including Sweden and Ireland, levy property taxes based on recent market values."