Factbox: From tax to homes, UK's Conservatives and Labour make economy a battleground for election

Trueblue

22/05/2024 17:40

LONDON, May 22 (Reuters) - British Prime Minister Rishi
Sunak's Conservatives and the opposition Labour Party will focus
on the economy as they ramp up their campaigning for a July 4
national election.
    Sunak said on Wednesday that "brighter days" lay ahead after
data showed Britain's inflation rate had fallen to close to 2%.
        Labour's Rachel Reeves, who hopes to succeed Jeremy Hunt
as finance minister, said voters remained under financial
strain.    
  
    Below is a summary of both parties' economic policies so
far, many of which appear similar after opposition leader Keir
Starmer shifted Labour to the political centre ground. 
    
    TAX - Britain's tax burden is the highest since World War
Two after public spending shot up during the coronavirus
pandemic and the surge in energy prices in 2022.
    Sunak has sought to create a clear dividing line with
Labour, saying he wants to axe all social security contributions
paid by workers in the long term.
    Labour says that plan is unfeasible. It has vowed not to
raise the rates of income tax or corporation tax on company
profits. It plans to charge value-added tax on private school
fees and to tax the overseas income of British residents who
claim non-domiciled status.
    But the reluctance of both parties to increase taxes more
broadly raises questions about how they can improve public
services and repair the public finances.
         
    SPENDING - Hunt has pencilled in future public spending cuts
that many external economists say look implausible given the
strains many public services are already under.
    Hunt says future gains in productivity in the public sector,
make his sums add up, but that is a challenge that has eluded
previous governments.
    Labour promises to improve public services and end
under-investment in infrastructure and other areas vital for
faster economic growth.
    FISCAL RULES - Sunak and Hunt set new budget rules in 2022
after Truss' short time in Downing Street triggered a bond
market meltdown.
    The main rule requires public debt to be falling as a share
of gross domestic product in the fifth year in official
forecasts. The government is only just on course for that
target, leaving little room for tax cuts or spending increases.
    A second rule states that government borrowing should not
exceed 3% of GDP also in the fifth year.
    Labour says it will keep the debt target but it will only
apply the borrowing rule to day-to-day spending, allowing it to
borrow more to fund investment. However, it has dropped a plan
to borrow up to 28 billion pounds a year for green investment. 
    
    GREEN ECONOMY - Labour wants to decarbonise the power system
by 2030, five years earlier than the Conservatives. It would
make it easier to build new onshore wind farms, create a state
energy firm and a national wealth fund to invest in green
technologies.
    The Conservatives say the plans will be much more expensive
than Labour claims.
    Sunak last year delayed a ban on sales of new petrol cars.
He said he remained committed to net zero emissions by 2050.
          
    THE EU - Sunak has improved ties with the European Union but
Brexit is a drag on the economy. New checks on food imports from
the bloc represent a latest hurdle for businesses.
    Starmer has promised to improve the relationship from 2025
when the UK-EU partnership deal will be reviewed, but he says he
will not take Britain back into the bloc's single market or a
customs union.
       
    HOUSE-BUILDING AND PLANNING - Before the 2019 election, the
Conservatives promised to get 300,000 new homes built annually
in England by the mid-2020s. But plans to relax planning rules
were watered down to avoid upsetting voters.
    Fewer than 250,000 homes were built across England, Wales
and Scotland combined last year.
    Labour promises to overhaul the planning system to
accelerate construction of homes and infrastructure. It plans to
devolve more powers to local authorities to get projects
completed more quickly.  
        
    LABOUR MARKET POLICIES - Labour, which has its roots in
Britain's trade union movement, plans to heavily restrict
so-called zero-hours contracts, give new hires more protection
against dismissal and raise sick pay. It says it will repeal
laws restricting trade union activities and promote more
flexible working arrangements. 
    Employers have expressed concern, prompting Labour to
promise to consult them on policy. The Conservatives say
Labour's plans would cost jobs and lead to more strikes.
            
    STABILITY - Starmer stresses how volatile British politics
has become since Brexit with five Conservative prime ministers
occupying Downing Street in eight years. The upheaval has
contributed to low levels of business investment. The prospect
of greater stability under a Labour government - especially if
it wins the big majority in parliament that polls suggest it
will - could help to reduce nervousness among investors.   
 ($1 = 0.7849 pounds)

 (Writing by William Schomberg and Suban Abdulla; Editing by
Alexandra Hudson)
 ((william.schomberg@thomsonreuters.com; +44 207 542 7778;
Reuters Messaging: william.schomberg.reuters.com@reuters.net))