Brussels turned up the heat on Britain yesterday over the Government’s plunge into the red as a result of the recession and the banking crisis.

In a fresh warning shot at the Treasury over its soaring budget deficit, the European Commission classed Britain alongside the struggling Irish Republic and stricken Latvia as the European Union economies whose national finances had been most dangerously hit by the costs of the crisis.

Alistair Darling was again urged to take more urgent and radical measures to bolster the UK’s budgetary position, which Brussels said was set to be even worse next year than the Chancellor has forecast so far as the recession bites harder than the Treasury expects.

“Taking into account the probability of a worse-than-expected deterioration in the UK’s budgetary position in the near-term, and the heightened risks to fiscal sustainability, there is a need for a more ambitious consolidation effort in the medium-term,” a Commission report found.

Brussels forecasts that the Treasury will have to borrow 12.75 per cent of GDP next year — more than £10 billion higher than Mr Darling predicts. It said that the Chancellor should take significant steps to raise taxes or cut spending, starting in the 2010-11 financial year, and set out plans for a longer-term financial improvement.

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