Britain Factsheet

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Factsheet
Feb 9th 2007
From the Economist Intelligence Unit
Source: Country ViewsWire


Background: The end of the second world war saw the decline of the UK as an imperial power. Residual links with former colonial territories, close relations with the US and a separate sense of identity delayed the UK's membership of the European Community (now EU) until 1973. Membership of the EU has proved fraught, with successive governments resisting the EU's integrationist drift.

Political structure: The UK is a constitutional monarchy. The head of state is Queen Elizabeth II. Parliament has an elected House of Commons (645 seats) and a non-elected House of Lords, which is in the process of being reformed. The right-of-centre Conservative Party governed the country for 18 successive years, before being heavily defeated by the Labour Party in a general election in 1997. The Labour Party was re-elected to a third consecutive term in May 2005. The third-largest party in parliament is the Liberal Democrats.

Policy issues: The government's main domestic priority is to deliver improvements to public services such as health, education and transport. Large increases in public spending have been earmarked for this purpose, but the public finances have deteriorated on the back of disappointing tax receipts. The tax burden may therefore have to rise further, if the government is to adhere to its fiscal rules, while making good on its promises on public services. The government's longer-term priority is to implement reforms to raise the country's productivity performance (which remains below the OECD average). There is little or no prospect of the UK holding a referendum on joining economic and monetary union (EMU) over the next five years.

Taxation: The tax rate on the profits of large companies is 30%. There are three bands of personal income tax set at 10%, 22% and 40%. The standard rate of value-added tax, from which a number of everyday goods are exempt, stands at 17.5%. Excise duties on tobacco and alcohol are among the highest in western Europe and have become associated with a growing incidence of crossborder shopping and smuggling. The overall tax burden is rising to pay for improvements to public services.

Foreign trade: Exports of goods totalled US$384.5bn in 2005 and imports US$509.4bn, resulting in a trade deficit of US$124.9bn.