What's at stake for Britain's economy in election?
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[December 11, 2019]
LONDON (Reuters) - The two main parties in Britain's election on
Thursday offer contrasting plans on spending, tax, the role of the
state, trade unions and Brexit.
Below is a summary of the main economic policies of Prime Minister Boris
Johnson's Conservative Party and Jeremy Corbyn's Labour Party.
SPENDING
Johnson is already loosening the purse strings after nearly 10 years of
cuts for many public services. He approved the biggest rise in
day-to-day spending in 15 years in September.
But proposals in the Conservatives' election manifesto for further
funding increases are modest and would mean continued austerity for many
services outside the health system, according to the Institute for
Fiscal Studies (IFS) think-tank.
Labour's spending plans dwarf Johnson's.
Corbyn wants to reverse cuts to services such as the police and give
public workers a 5% pay rise, which would push day-to-day spending up by
82.9 billion pounds ($106 billion) a year by 2024. The equivalent
increase in the Conservatives' spending plans is 2.9 billion pounds.
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On investment, the difference is smaller but still stark. Under the
Conservatives, it would rise by about 20 billion pounds a year, or a
third of Labour's planned increase.
The IFS has said Labour's plans are too big to implement, at least in
the short term.
TAX
Johnson would gradually increase the threshold at which workers pay
social security contributions. He has also ruled out increasing income
tax and Value-Added Tax.
Corbyn has said Labour's spending increases will be funded largely by
higher taxes for companies and people in the top income bracket.
The IFS has said both parties would probably have to raise taxes
further, or borrow more, if they stick to their plans.
ROLE OF THE STATE
Labour's left-wing leadership wants to put the state back at the center
of Britain's economy.
Plans to nationalize power networks, water, rail and postal companies
expanded last month to include the fixed-line network of telecoms group
BT <BT.L> to give free broadband to everyone.
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A polling station sign is seen ahead of the forthcoming general
election in London, Britain, December 11, 2019. REUTERS/Hannah McKay
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Labour says workers in large companies will get a 10% stake via Inclusive
Ownership Funds which would share profits with staff and pump money into
government apprentice schemes.
Johnson favors free market policies but he has proposed new state aid rules,
changing state purchasing policies and reforming farming so public bodies buy
more British goods.
Labour has promised a "huge roll-out of individual and collective rights" to
give more power to unions.
BREXIT
Britain's relationship with the European Union will have a major bearing on the
economy.
Johnson wants to leave by Jan. 31 and secure a trade deal with the bloc by the
end of 2020 when a transition period ends, meaning tariffs and other barriers to
trade could come into force for British goods and services.
Johnson says ending the Brexit uncertainty would "unleash a great tide of
investment" and boost the economy.
However, getting a new deal done before the end of next year is seen as tough
given the complexities of trade negotiations.
Corbyn says he will negotiate a new exit deal and put it to a referendum,
raising the prospect of Britain reversing its Brexit decision altogether.
The finance ministry estimated in 2018 that striking a free trade deal with the
EU would reduce the size of the economy by about 5% by the mid-2030s compared
with staying in the EU.
Labour's proposal of remaining in an EU customs union with close alignment to
its single market is widely seen as being less damaging to the economy.
(Reporting by William Schomberg; Editing by David Clarke)
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