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

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23/05/2024 10:19

(Repeats story first published on 22 May)
       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)
((mailto:william.schomberg@thomsonreuters.com; +44 207 542 7778;
Reuters Messaging:
rm://william.schomberg.reuters.com@reuters.net/))