UK parties' tax row intensifies in campaign focused on economy

[LONDON] UK Prime Minister David Cameron's Conservatives and the Labour opposition continue to clash on tax plans as the Tories hit back at Labour claims they have made families worse off.

Chancellor of the Exchequer George Osborne on Tuesday will say the previous Labour government imposed taxes on the average household's earnings worth 1,895 pounds (S$3,825) a year in real- terms when they were last in government, citing House of Commons figures. His opposition counterpart Ed Balls used data by the Institute of Fiscal Studies on Monday to claim families were 1,100 pounds a year worse off since Mr Cameron took office in 2010.

The data "show Labour's got form on tax," Mr Osborne said, according to prepared remarks released by his Conservative office. "When it comes to tax rises, Ed Miliband and Ed Balls have done it all before, and they would do it all over again, if they had the chance. Higher taxes and higher debts under Labour would cost jobs and take Britain back to square one."

The economy has become the key battleground in a campaign that has so far seen little shift in polls between Labour and the Tories, with neither party set to win a majority on May 7.

While the Tories argue a vote for Labour would mean "chaos" and hurt Britain's recovery, Labour says Conservative policies favor only the wealthiest and would leave working families worse off.

TAX THRESHOLD

Claims and counterclaims on tax have become increasingly acrimonious since the IFS said on March 30 that a Conservative assertion that families would pay 3,028 pounds more in tax under Labour is of "little value."

Mr Osborne and Mr Cameron used speeches in Bristol, southwest England on Monday to reiterate the claim, as well as their pledge to raise the income tax threshold for middle earners. They also accused Labour of planning tax increases.

The Liberal Democrats - the Tories' current coalition partner in government - have positioned themselves as giving Cameron's policies more fairness, while tempering potential spending by Labour. Their leader, Nick Clegg, will Tuesday say that his party would increase the personal allowance at which people start paying income tax to 12,500 pounds once the budget deficit is reduced, by 2017 to 2018. He will say tax cuts will be funded by cracking down on tax avoidance, according to remarks released by his office.

SHIFTING FOCUS

The promise comes as the Conservatives sought to claim credit for raising the allowance to 10,600 pounds - a policy initially mooted by the Liberal Democrats in their 2010 manifesto.

Mr Clegg will also say his party will increase the tax rate on dividends for higher and additional-rate taxpayers to fund a commitment to increase the income tax threshold to 11,000 pounds in the first year of the next parliament.

Labour, meanwhile, will seek to shift the focus of the debate to the national health service, and release a poster claiming waiting times at doctors' surgeries have increased under Mr Cameron's government.

The UK Independence Party - which Monday announced that a former Conservative parliamentary candidate for Hull West and Hessle, Mike Whitehead, joined their ranks - will make a further attack on the Conservatives.

The party's leader, Nigel Farage, will pledge to spend at least two percent of GDP on Britain's defence budget, in line with Nato's target, and will accuse Cameron of "profoundly letting down" service personnel, according to a statement released by Farage's office.

BLOOMBERG