The European Commission said Britain, despite tough spending cuts, remained in breach of the 28-nation bloc's deficit rules and gave it another two years, to 2016-17, to put its fiscal house in order.
The Commission said Britain's budget deficit -- the shortfall between revenue and spending -- stood at 5.2 percent of annual economic output in the current 2014-15 financial year, still way above the EU limit of 3.0 percent it was meant to meet.
The government should accordingly rein in spending to hit a headline deficit figure of 4.1 percent in 2015-16 and 2.7 percent in 2016-17, it said.
The EU first put Britain under what is known as an Excessive Deficit Procedure in 2008, giving it until 2009-10 to come into line.
But the global financial crisis put government finances everywhere under intense pressure and pushed the British deficit to 10.9 percent, with Brussels extending the deadline to 2014-15.
The Commission's findings will be submitted for approval to the European Council, which groups the leaders of the 28 member states who may try to get them reversed or watered down.