Government warned on budget savings

The warning is contained in a draft of the EC's Post Programme Surveillance report – which has been sent to the Department of Finance.

It says the coalition's economic forecasts have been overly optimistic – and there is “no room for manoeuvre” if the economy is to fully recover.

The EC has also sounded a warning to Ministers who've spoken about possible tax cuts – because they “create expectations” that can be “difficult to manage”.