BRIGHTON, England (Reuters) - Britain should keep its mix of spending cuts and tax rises in the next phase of austerity, the Lib Dem junior coalition partners said on Wednesday, raising a possible stumbling block to joining any future Labour-run government.
The Lib Dems have said they expect the 2015 parliamentary election to produce another coalition government - with either the Conservatives or Labour Party as the senior partner and the Lib Dems acting as kingmakers again.
Labour favours a softer approach to the pace of cuts and has argued for tax rises to contribute more to deficit reduction to ease pressure on public services. The debate over how to pay for future austerity could dominate the 2015 election.
Conservative chancellor George Osborne’s 2012 budget called for 49 billion pounds of extra savings in the two years after 2015, with the share of spending cuts rising to around 80 percent over the seven-year era of austerity.
“It’s too early to say precisely what the detailed policies will be but I think the mix of tax and spend that we’ve set out in this parliament is broadly right and I wouldn’t particularly want to deviate hugely from that in either direction,” Lib Dem Treasury minister Danny Alexander told Reuters in an interview.
“I think we have got that policy mix right and I‘m determined to stick to that mix to maintain the credibility and confidence in the United Kingdom’s ability to pay its way in the world that we as a government have re-established.”
Alexander, Osborne’s number two at the Treasury, has said the coalition must say - before the 2015 election - how it intends to make cuts in 2015/16. The Lib Dems want to see the wealthy paying more, including a tax on expensive homes.
“We think that raising more money from those who have the most has to be part of the next phase of austerity,” he said at his party’s annual conference on the south coast of England.
The coalition wanted to all but erase a record budget deficit by the 2015 election but it has had to add more years of cuts because of Britain’s disappointing economic performance.
Markets expect poor growth to have a further negative impact on the government’s austerity targets in December, when Osborne delivers updated growth and borrowing forecasts.
“Growth is far lower than we’d hoped,” Alexander said, without saying whether more years of cuts would be required.
In March, the UK’s budget watchdog forecast growth of 0.8 percent in 2012 but most economists now expect the economy will contract.