Whoever wins, Britain faces more austerity medicine

In the cacophony of slogans ahead of Britain’s general election on May 7 one thing is for sure — the country faces more austerity whichever party wins.

Conservative Prime Minister David Cameron positions himself as a saviour who rescued the debt-ridden economy he inherited when coming to power in 2010.

With economic growth picking up to 2.8 percent in 2014 and the unemployment rate falling to 5.6 percent, his Labour rival Ed Miliband has an uphill task.

But Miliband’s centre-left party says the headline numbers mask an uneven recovery that has mostly benefited the rich.

Labour point out the average wage of a British worker has fallen by £1,600 ($2,429, 2,234 euros) a year since Cameron took office — and that many new jobs being created are badly paid and offer little security.

Miliband has pledged to crack down on abuses of so-called zero hour contracts, under which employees have no minimum guaranteed hours.

Cameron has meanwhile halved the budget deficit since 2010, when it was above 10 percent of gross domestic product (GDP) due to exceptional measures taken by the then Labour government in the global financial crisis.

Labour says Cameron broke his promise to balance the books, although new data out last week showed the coalition government beat its own deficit-cutting target for the 2014-2015 financial year to March.

The real difference between Conservatives and Labour is over the timing of the deficit reduction in the future.

The Conservatives promise a surplus by 2018-2019, while Labour says this would happen before the end of the next parliament — meaning by 2020 at the latest.

With a more gradual rate of deficit cutting, experts say Labour may be able to spend a bit more.

“In practice though, we doubt that the differences would be quite that large,” said Samuel Tombs from research firm Capital Economics.

Tombs said the Conservatives could be pushed to loosen the purse strings to keep their word.

“The Tories have committed to a series of costly promises… At the same time they have also pledged not to raise income tax, national insurance or VAT (value added tax).

“There would therefore appear to be a relatively high chance that they would have to soften their ambitious fiscal targets,” he said.

In both cases, Britain would still be left with a mountain of debt. The government currently has an overall debt of £1.48 trillion — some £500 billion higher than 2009/10.

Labour say all their promises are carefully costed, and that they will not take on any new debt and slash the existing debt.

“Labour’s plan to balance the books means making tough, but fairer choices,” reads their manifesto.

The Institute for Fiscal Studies, an independent think tank, said that all the main parties “leave much unanswered” when it comes to public finances.

“Labour’s plans include some small net tax increases and their commitments to increase certain areas of public spending are no bigger than the Conservatives,” it said.

Neither of the two main parties has come out with any major proposal for new ways of raising funds and both are promising to do more to fight tax evasion.

Another key point is that neither the Conservatives nor Labour are expected to win an overall majority, which means they will have to seek allies to govern.

With a growing fragmentation of the vote, “the British government is about to become much less stable and predictable and with a significantly weaker mandate,” said Ross Walker, an economist at RBS bank.

Big business leaders overwhelmingly support the Conservatives, but many are concerned about the referendum on Britain’s EU membership that Cameron has promised to hold by 2017 if he wins.

John Cridland, head of the Confederation of British Industry (CBI), Britain’s main business lobby, is even more stark in his assessment of what will happen after the May 7 vote.

“It could end up with a cocktail of uncertainty and uncertainty is damaging for investment,” he said.