Britain’s opposition Conservative Party pledged on Monday to reverse the government’s planned tax hike if it wins a looming national election, saving both workers and employers money by cutting government spending instead.
The Conservatives’ move to put tax policy at the heart of its election manifesto against Prime Minister Gordon Brown’s Labour Party reflects the intense focus on Britain’s fragile economy as voters begin to weigh up their options.
Mr. Brown is yet to officially call the election date - widely expected to be May 6 - but the battle to win over recession—weary Britons has already begun.
Mr. Brown’s Treasury chief Alistair Darling used last week’s annual budget to take from the rich to give to the poor - hiking taxes on the wealthy to pay for breaks given to lower income earners such as a headline—grabbing decision to scrap house purchase duties for first—time home buyers.
Stung by criticisms that they haven’t provided any real detail on spending and taxation plans, the Conservatives retaliated on Monday by announcing they would reverse the bulk of the government’s planned increase in National Insurance, a social security contribution paid by employers and workers.
The rise in payroll tax for workers and employers is a key part of Labour’s pledge to halve Britain’s record budget deficit - forecast to reach 167 billion pounds ($249 billion) this year - within four years.
Labour maintains that cutting the stimulus any faster than that, via less spending and higher taxes, could send the economy back into a dreaded double—dip recession.
But Conservative economy spokesman George Osborne, said that he had identified enough savings by trimming waste from government spending to both exempt seven out of 10 working Britons from the planned one percentage point rise from next April - and still reduce the budget deficit faster than Labour.
Mr. Osborne said he would fund the payroll tax reversal by cutting some 6 billion pounds from the public sector next year, via administration, procurement, energy bills and staff sickness as soon as his party came to office.
“The re—election of a Labour Government under Gordon Brown - with more debt, waste and taxes - will bring us a new recession,” said Mr. Osborne. “Labour will kill the recovery with their tax on jobs. We will cut Labour waste to stop it.”
Labour, which is trailing in the opinion polls after 13 years in power, accused Mr. Osborne of making promises he could not deliver.
“He can’t claim it’s going to reduce the deficit and pay for a tax cut at the same time,” said a spokeswoman for Mr. Darling, speaking on customary condition of anonymity.