Factbox - Political risks of Britain's austerity programme

LONDON (Reuters) - An emergency budget to be published next week aimed at tackling Britain's deficit could begin to expose faultlines in the coalition government.

The May 6 election ushered in an alliance between the centre-right Conservative Party and the left-leaning Liberal Democrats, the coalition's junior partner.

Their centrepiece policy is to reduce a budget deficit at about 11 percent of national output, a plan markets welcome, but the tough measures proposed could strain the fledgling alliance:

CAPITAL GAINS TAX

The new government's plan to raise capital gains tax -- a tax on the sale of assets such as shares and real estate -- has already highlighted cracks in the coalition.

The Liberal Democrats, or Lib Dems, are pushing for the levy, currently at 18 percent, to be brought more in line with income tax, which has a basic rate of 20 percent, but jumps to 40 percent and then 50 percent for the highest earners.

Senior Conservative members of parliament have vigorously opposed the plan, arguing that the tax would discourage the wealthy from staying in Britain and would punish people who have invested over the long term, such as pensioners and landlords.

VALUE ADDED TAX

Parties did not pledge to increase value added tax -- a tax on goods and services -- in their election campaigns, but did not rule out a rise either. The new government's programme does not include a VAT rise, but speculation has mounted that the levy may jump to 20 percent from 17.5 percent. The Lib Dems argue this would disproportionately hurt the poor.

CORPORATION TAX

The coalition has agreed to simplify the corporation tax system and "reduce headline rates," with the Conservatives pledging to cut the levy to 25 percent from 28 percent.

The Lib Dems are concerned such a move would come at the cost of other financial support for business.

PARTY, PUBLIC, REVOLT

Major spending cuts and public sector job losses are expected, stoking union activity and public resentment.

As the cuts kick in, opposition to the government's plans may coalesce as a series of political party conferences due in late September and early October gives grass-roots members an opportunity to voice dissent.

A STRONGER LABOUR OPPOSITION

The Labour Party lost power in the May election after 13 years in government, and is now holding a contest for a new leader, reducing its ability to mount an effective opposition to Conservative-Lib Dem rule.

When a new leader is elected in September, and as spending cuts stoke public resentment, Labour is more likely to be able to challenge the government's budget plans.

PERSONALITY CLASHES

Business Secretary and Liberal Democrat Vince Cable was outspoken before the election in his criticism of the new finance minister George Osborne's plans for Britain's economy, labelling Osborne, a Conservative, "out of his depth."

Cable had warned cutting spending too deeply, too quickly could trigger another recession, but since the election he has backed Conservative plans to cut spending soon.

However, media reports point to strains in their relationship, particularly over Cable's hard line on new banking rules after the 2008 financial crisis.

INEXPERIENCE

The ability to push through unpopular spending cuts will rest partly on the perceived credibility of those in charge.

Forecasts from the newly formed Office of Budget Responsibility -- meant to boost confidence in the management of public finances -- will be scrutinised for their reliability.

Danny Alexander, a Lib Dem and chief secretary to the treasury, will have to prove himself given that he does not have a financial background or experience of high office.

He replaced David Laws, an economist, who stepped down after an expenses scandal after only 18 days in office. Another sudden departure of a Lib Dem minister could be difficult to deal with given the dearth of party members with experience.

OTHER PRESSURES

Despite putting up a united front, the Lib Dems and Conservatives are divided on other issues. A planned referendum on voting reform has next to no backing from the Conservatives and is likely to see the coalition partners campaigning against each other.

Britain's continued involvement in the war in Afghanistan may also strain the partnership given that the Lib Dems are less enthusiastic than the Conservatives about the mission.

Also, unlike the Conservatives, the Lib Dems are against more nuclear power stations and the replacement of Britain's costly Trident at-sea nuclear deterrent system.

(Editing by Janet Lawrence)