1. Tax – Difference
Labour argues that the Coalitions economic plans are hitting the ‘poorest, hardest’. The Conservatives have lowered the top rate tax to 45% and staged a decrease in corporation tax which is to be 20% by 2015. The corporation tax cut will cost the Chancellor 400m in 2015-16 and so he is taking a risk on business which links into a later point. The Labour party has said it would consider the mansion tax proposed by the Liberals. This was partly a political manoeuvre to appeal to the Liberals or cause tensions in the coalition but also to show they are the party on the side of the working class. Ed Balls claimed that the benefits of the rising of the personal allowance to £10,000 would be swamped out by the higher VAT and cuts to tax credits. Figures from the IFS supported this showing that one earner families would lose an average of just under £4,000.
2. The private sector – Difference
Osborne went about such a strong cuts agenda believing that the private sector would step in when the public sector left. The IMF has suggested the UK slow down its austerity or even look for a ‘plan B’ in the face of a ‘weak private sector’. Despite these warnings for the Chancellor, plans were unveiled earlier this year that as many as one in six civil servants would be moved into the private sector as government services such as the nudge unit and possibly the ONS become ‘mutualised’ so part owned by the private sector. You can make a synoptic link here about the commissioning of giving out disability benefits to private companies and the commissioning of the work programme to private companies. Also link it to Thatcherism. How this differs from Labour is tenuous and is basically that Labour has not announced any plans for this type of reliance on the public sector and it would be polar to their ideology. Brown said he did not want to ‘lean on the private sector’ before entering office as Chancellor.
3. Banking – Difference
The way to deal with the banks following the financial crisis is actually a clear difference between the Coalition and Labour. In Labour’s 5 point plan it says a £2bn tax on bank bonuses to fund a real jobs guarantee for all young people out of work for a year and build 25,000 more affordable homes. The Coalition has steered away from anything to severe on the banking sector for example the cap on bankers bonuses through EU legislation was heavily opposed by Osborne. Furthermore, when Osborne announced he would ‘electrify the ring fence‘ between retail and investment banking, Labour argued this did not go far enough and Darling said there needed to be a ‘Chinese Wall’ to ensure a complete separation and protect tax payers from future problems seen from needing to bailout big banks such as RBS.
4. Cuts – Similarity
Prior to the election, Labour had said they would cut 20% in each department whilst the Conservatives said 25%. The difference is not huge and Labour had not specified what areas would be cut, nor had they ring fenced certain pots of spending. In the face of cuts to policing, local government and welfare, Labour has condemned the cuts but not said what it would do differently. It has not pledged to reverse any of the cuts either. Labour’s inaction is suggestive of passive agreement, the lack of a clear plan from the party makes it difficult to see how their cuts agenda would differ from the Coalitions. In a speech to the Fabian Society, Balls said he accepted every spending cut being imposed by the coalition and endorsed George Osborne’s public sector pay freeze, adding that it might need to continue beyond the end of the current parliament. Many see this as Balls trying to appear credible on the economy.
5. Investment – Similarity
Programmes like HS2 were initiated by the previous Labour government and survived through the Coalition. Both the government and opposition believe in investment in infrastructure projects and more projects like HS2 which can ‘help the North-South divide’ and aid future economic growth. In 2012 the government agreed for up to 40bn to be put towards infrastructure projects. Since then that figure has increased also it was recently reported that 1 in 4 projects is not set to finish on time, pressuring Osborne to speed up capital spending. Labour supports these projects and has only criticised the government for not spending more on infrastructure investment.
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The coalition government has confirmed that it is revising its plans to cap child benefits from higher rate taxpayers who earn above £42,735. While the treasury maintains that it is a popular move, the legislation has attracted opposition from across the political spectrum.
At cabinet this week, David Cameron forced his colleagues to confront failures in the government’s economic growth strategy. It is often argued that elections are won and lost on the basis of the economy, and with a somewhat gloomy outlook ahead and a tumultuous past lingering, the government knows that the economy is its main focus for maintaining electoral support and the opposition know it as well.