Political Conflict between the Main British Political Parties: Future of Economic Policy

Topics: Tax, Public finance, Macroeconomics Pages: 3 (901 words) Published: May 29, 2013
How much political conflict exists between the main British political parties over the future of economic policy?

There has always been some form political conflict between the main British political parties over the subject of economic policy. Even when there was a general consensus between Labour and the Conservatives – from 1945 to the late 1970s when they were both committed to Keynesian economics – there were some aspects of their policies where there was conflict. Under the leadership of Margaret Thatcher in the 1980s, the two main parties moved in different directions, with the Conservatives taking a laissez-faire approach and Labour moving sharply to the left. In the mid 1990s, they both moved closer together, concentrating on supply-side measures. Since the 2007 economic crisis, there has been an increasing amount of conflict between both main parties and the Liberal Democrats on how best to deal with the recession and its aftermath. As the economy still remains in a very poor state, there still remains much conflict over how to improve its state.

One major policy area where there is both consensus and conflict is the area of taxation. The general consensus between the main parties is to lower taxes – this would boost consumer spending which would help stimulate the economy. In regards to income tax, both parties favour a two-tier taxation system, with the progressive reduction of the taxes of the lower tier. Despite these similarities between Labour and Conservative taxation policy, there are also some significant differences. The Conservatives have a preference for indirect taxes as the New Right thinks that direct taxation is harmful to personal initiative and thus has a negative effect on the economy. The conflict between the parties on the issue of indirect taxes could be illustrated by the changes in VAT. Originally at 17.5%, the Labour government reduced the standard rate to 15% in December 2008. Even though this was later raised back up to...
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