Economy key battleground in UK election


With a general election expected in early May, making life easier for small businesses is moving to the top of the political agenda. The Conservatives are promising to reverse an increase in national insurance, while Labour takes credit for saving the banks and the Liberal Democrats claim to have foreseen the crisis.

In the wake of last week's budget (EURACTIV 25/03/10), the Conservatives have pledged to partially reverse the government's plans to increase national insurance by 1%.

The increase, due to come into effect in April 2011, has come under fire from business groups who claim it will hurt job creation by increasing costs for employers and employees.

A consortium of nine business organisations has launched a petition demanding the repeal of the insurance hike on the grounds that it is a "tax on jobs" which could result in the loss off 57,000 jobs in the small business sector.

Conservative leader David Cameron has also revealed plans to make tax cuts the centrepiece of his election campaign, preferring to reduce spending in a bid to rein in the budget deficit.

However, Chancellor Alistair Darling was praised by industry groups in the wake of his budget speech in which he cut business rates for small firms and introduced a credit adjudicator with the power to force banks to lend to SMEs.

Prime Minister Gordon Brown's obvious weakness is his tenure as chancellor during the period of light-touch regulation, which fostered a growing dependence on revenues from the City-based financial services sector.

In spite of this, Labour is playing the experience card and plans to target the shadow chancellor, George Osborne, who they see as "immature and lightweight". Osborne, say Labour strategists, is a weak link in the would-be Tory cabinet.

In stark contrast, Liberal Democrats are keen to turn the spotlight onto their money man, Vince Cable – a seasoned economist seen as their trump card as the election draws ever closer.

On top of his PhD in economics, Cable can claim some prescience in warning that Britain's burgeoning personal debt would lead to a financial crisis.

As far back as November 2003, Cable was criticising the Labour government for letting debt spiral upwards. Cable has also slammed UK banks for unscrupulous lending practices.

However, opinion polls suggest the Liberal Democrats will finish in third place, so Cable is unlikely to be handed the keys to the Treasury.

The growth in fringe parties like the British National Party, UK Independence Party (UKIP) and the Green Party could also be significant if local elections are any guide to how smaller groups will fare.

The economy and how to tackle the national debt will be top of the agenda but social issues like health reform, crime and schools will also feature.

The UK's relationship with Europe is also likely to be part of the debate, with some Conservatives following a eurosceptic agenda in defending their seats against UKIP and the BNP (British National Party).

Shadow Chancellor and Conservative MP George Osborne says the budget deficit can be tackled without increasing payroll taxes for employers and workers.

"Identifying £6 billion of savings in 2010 gives me the confidence that [...] we will be able to act more quickly on the deficit and at the same time avoid the most damaging part of (Prime Minister) Gordon Brown's national insurance tax rise," Osborne said.

Chancellor of the Exchequer Alistair Darling said his budget plan would "secure the recovery, tackle borrowing and invest in our industrial future". "It will continue targeted support for businesses and families where and when it is needed," he said.

Darling claims the Conservatives' plans to cut spending would "suffocate" economic recovery.

Vince Cable, Liberal Democrat finance spokesperson and candidate for chancellor, said there were some creditable elements in Darling's budget but described it as "otherwise very worrying".

He said the government was neglecting to make a serious effort to tackle the budget deficit.

"Most of the bill for the banking crash and subsequent recession has been paid, by the government, using borrowed money. Some people have paid directly, in lost jobs or pay cuts. But most of the cost of the biggest financial disaster in my lifetime has been taken on by the state," Cable wrote in the Daily Mail.

Cable said the Conservatives' plan is no clearer and called on his opponents to be frank with the electorate about how the deficit can be slashed. He listed a string of schemes that could be cut, including the winter fuel payments for pensioners under 65 and "unnecessary defence contracts, such as the Eurofighter".

Open Europe Research Analyst Sarah Gaskell wants more attention given to the role of the EU during the next six weeks of intense political jousting. Open Europe has published a study showing UK regulations are more cost effective than those emanating from Brussels.

The research found that for every £1 spent enforcing EU regulations since 1998, the benefit was £1.02, but for domestic regulators, the benefit of spending £1 implementing the rules brought a benefit of £2.35.

"This shows the massive influence the EU has over our economy and everyday life. Whether we think this is a good or a bad thing, politicians can no longer be in denial over the extent of this influence and must dedicate much more attention to the EU in the run-up to the general election," said Gaskell.

The United Kingdom is due to hold a general election before the summer, with pundits predicting that voters will go to the polls on 6 May.

Incumbent Prime Minister Gordon Brown, who succeeded Tony Blair in 2007, begins the campaign as the underdog. His popularity ratings having been low, leading observers to predict an easy win for David Cameron's Conservative Party.

However, Brown has staged something of a comeback in recent weeks and Cameron's lead has narrowed. The prospect of a hung parliament – where neither of the larger parties has an outright majority of seats – means the Liberal Democrats could play a decisive role in deciding who becomes the UK's next prime minister (EURACTIV 10/03/10).

6 May: UK general election. 

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