By David Milliken
LONDON (Reuters) - The stark choice faced by Britons in May's national election is summed up nowhere more clearly than by the two men vying to be finance minister. One wants more austerity to erase the deficit, the other says it is time to talk about living standards.
The Conservatives' George Osborne, 43, and Labour's Ed Balls, 48, have helped define what their parties stand for. Now each is betting that the other has miscalculated the public mood as they bid to oversee the world's sixth-largest economy - now growing again after years of painful budget cuts.
"We are getting a genuinely significant choice," said Paul Johnson, director of the Institute for Fiscal Studies, a non-partisan think tank. "Voters will be choosing between two different economic visions."
Osborne is seeking another five years to finish the challenge of wiping out what remains of one of the world's biggest budget deficits. Balls says Britain should focus more on boosting growth and living standards, and argues Osborne's strategy masks an ideological crusade to shrink the state.
Both want to reduce government borrowing. But Osborne aims to get rid of the deficit altogether in order to cut Britain's debt pile faster, while Balls is happy to borrow modestly to fund long-term investment and boost growth.
It is the biggest difference between the parties since 1992 or even before, believes Johnson.
Opinion polls put the two parties neck-and-neck but show the Conservatives are more trusted to run the economy than Labour. However the Conservatives are also widely regarded as less fair, having cut welfare benefits while lowering the tax rate for Britain's highest earners.
"When you want people to do a job, it's the Conservatives people turn to. But they do have an Achilles' heel, and that is fairness," said Joe Twyman, an analyst at polling firm YouGov.
But whoever is finance minister after May might have to rework at least some of their plans. With voters drifting away from the two major parties, neither looks likely to win outright and may need to do a coalition deal with either the centrist Liberal Democrats, who favour slower deficit reduction, or the Scottish nationalists who are hostile to austerity.
PERSONALITY CLASH
The two men also present different personalities to the public.
Osborne favours appearances at factories and construction sites, wearing a hard hat and hi-vis jacket in an attempt to demonstrate a recent pick-up in wages and growth. He is gambling that this will count for more with voters than the fact that many are worse off than in 2010, and convince them that his tough spending cuts are working.
Though Balls talks of fairer policies he has a reputation as a political bruiser after years spent advising former prime minister Gordon Brown.
Television footage which emerged recently showed him joking over how he helped strip the Bank of England of its powers to regulate banks in 1997. He has since tried to soften his image by admitting to crying when he listens to the Sound of Music.
The men's differences often spill over into taunts and mocking gestures in the rowdy Westminster parliament.
On Monday, during a debate about past tax avoidance by British bank HSBC, Osborne described Balls and his colleagues as "a bunch of arsonists throwing rocks at the firefighters who are putting out the fire that they started".
Balls has returned fire of his own by saying the Conservatives' promise of referendum on Britain's European Union membership represents the biggest risk to the country's economy.
The two men's different relations with their bosses could also have a bearing on the ability to deliver their plans.
Osborne managed Cameron's campaign to become Conservative leader in 2005 and the two men remain close. But Balls and the more left-wing Labour leader Ed Miliband are seen to be more distant after they competed for the Labour leadership in 2010.
While Osborne's promise of more spending cuts was met with cheers at a Conservative conference last year, an announcement of spending restraint by Balls was booed by some Labour members.
Given the scale of the challenge of returning Britain to fiscal health, having the backing of the party and its leadership will be vital.
CREDIBLE PLANS
Britain's budget deficit has halved since 2010 but, at 5 percent of gross domestic product, it is still way above Osborne's original plans of five years ago and will push the country's debt to an estimated 81 percent of GDP next year.
His latest plans aim for a small surplus which could bring down the debt-to-GDP ratio by 27 percentage points over the 2020s, according to the IFS.
Labour's plans would lead to a much smaller 9 percentage point fall, which Conservatives and some economists say would leave Britain vulnerable if there was another economic crisis because it would have only limited ability to borrow more.
"If there was a market concern, it might be about the credibility of the pace and scale of (Conservative) cuts, whereas with Labour the concern is about the scale of the borrowing. It is a bit of a tightrope," said Sam Hill, an economist at RBC.
Osborne aims to achieve his plan with further deep cuts to public spending, particularly in areas such as defence and policing which could see their budgets cut by 40 percent between 2010 and 2020. Welfare for working-age people, which has already been curbed, is set for further cuts to fund higher pensions.
Other than a few details, however, Osborne has shed little light on how spending cuts would be achieved.
Labour's plans require much smaller cuts, equivalent to around a tenth of the Conservatives'. Under Labour 100,000 public-sector jobs would be cut by 2020, compared with 750,000 under the Conservatives.
Balancing the books would be much easier for both parties if they were willing to raise taxes.
But for Osborne, it is a point of principle that public spending should bear the burden of austerity even if in practice he raised sales tax in 2010's budget. Labour meanwhile is wary of being type-cast as a high-tax party who will hit the pockets of voters whose incomes have suffered since the financial crisis.
"Unless you are going to have less good public services maybe in the long run you need higher taxation. That feels to me like the debate we are not having which we ought to have," Johnson said.
However, he added, both parties are likely to raise taxes should they win May's election, if history is any guide.
And without tax rises, some economists doubt Osborne can achieve his aim of running a budget surplus.
"Osborne's plans are simply not credible," said Rob Wood, UK economist at Berenberg, a German bank. "Cutting government spending to 35 percent of GDP in a country with the National Health Service is going to be very difficult."
(Editing by Sophie Walker)
