LONDON (Reuters) - Britain’s two big political parties have sent contrasting signals on spending and tax before a Dec. 12 national election.
Prime Minister Boris Johnson said on Sunday his Conservative Party, which models itself as a guardian of the public finances, would adopt “sensible” and “moderate” fiscal policies. He also ruled out increasing Britain’s three main taxes.
Jeremy Corbyn, the left-wing opposition Labour Party leader, announced last week a surge in spending, largely funded by higher taxes for companies and people in the top income bracket.
Corbyn dismissed critics who said his plans were too radical, saying they would leave Britain on a par with Germany in terms of state spending.
Below are details of the rival plans.
Labour says it wants to reverse a decade of public service cuts as quickly as possible and give public workers a 5% pay rise. It says that would push day-to-day spending above current plans by 82.9 billion pounds ($106.4 billion) a year by 2024.
The equivalent increase in the Conservatives’ plans was just 2.9 billion pounds although that figure does not include a big increase in spending announced in September.
There is also a gap on investment spending: the Conservatives plan increases of about 20 billion pounds a year while Labour would spend about 55 billion pounds a year more.
Labour excluded the cost of its plans to nationalize industries such as rail, power and broadband, arguing that the acquisition of assets meant it was fiscally neutral. It also did not include 58 billion pounds it says it will spend to compensate older women for a rise in the retirement age.
The Conservatives’ main giveaway to voters is a proposed rise in the threshold at which people start to pay social security contributions, initially worth about 100 pounds a year for most tax payers, with an aim to increase it further.
But he has canceled a plan to cut corporation tax further next year and dropped a promise of tax cuts for higher earners.
Labour says that 83 billion pounds of tax rises, to offset increases in spending, will be raised from companies and the top 5% of earners. It will also raise the rate on capital gains tax and dividends.
Middle-earning married couples will pay an extra 250 pounds a year as Labour plans to scrap a tax break.
Both parties have sought to show that they will keep a grip on the public finances by proposing new rules for the budget.
Johnson’s finance minister Sajid Javid ditched a rule set by his predecessor Philip Hammond to cut debt as a share of gross domestic product each year. Instead, Javid says debt will be lower as a share of GDP by the end of the next parliament.
Labour has pledged to keep interest repayments on government debt below 10% of total tax revenue, similar to recent levels.
On the budget deficit, Labour says it will aim to balance the books - excluding spending on investment - by the end of a rolling five-year forecast period.
The Conservatives have said they will do it in three years.
Britain ran its first so-called current budget surplus since 2001/02 last year but is on track to slip into the red again.
Labour said its rules would be suspended if the Bank of England reactivates its bond-buying programme, or if the BoE says it is out of ammunition to stabilize the economy.
Both parties’ plans assume Britain will avoid the economic shock of a no-deal Brexit. Johnson is hoping the Dec. 12 election will break the impasse in parliament that forced him to ask for a delay in leaving the European Union until Jan. 31.
Even if Johnson is able to get his EU divorce deal done by then, many companies fear another round of uncertainty when a Brexit transition period ends on Dec. 31, 2020. Johnson says he will strike a new trade deal with the EU before then.
Reporting by William Schomberg, Andy Bruce and David Milliken