The UK economy has enjoyed steady growth since the mid 1990s without a recession despite global slowdowns.

This has led to low unemployment and rising living standards.

Inflation, targeted by an independent Bank of England, has remained low and interest rates fell sharply.

This has helped fuel a house price boom, and interest rates have begun to rise again.

Labour claims its tough budget discipline has helped end the "boom-bust" cycle.

Labour's reputation for prudence has been threatened by a growing budget deficit which peaked last year.

Labour is now in danger of breaching its own "golden rule" that current spending should balance tax revenues over the economic cycle to 2006.

Some spending has been reclassified as investment, where borrowing is allowed.

Many experts believe that a new government will have to raise taxes to ensure that the golden rule is not broken in the next economic cycle.

All three parties accept that the tax burden will rise with economic growth to close the budget gap.

Labour plans assume a �25bn increase in tax revenues from existing taxes, such as corporation tax and income tax, without having to raise rates.

The Liberal Democrats want to increase taxes on those earning over �100,000, raising �4bn more, for �29bn in total.

The Conservatives want to make �4bn in tax cuts, and will fund a claimed �8bn tax gap by cutting waste, but still assume an increased tax take of �13bn.

Labour has claimed that the Tories will cut public spending by �35bn, leading to big cutbacks in front-line services.

In fact the Tories plan to increase spending by 2% each year, compared to Labour plans to increase it by 3%.

And the Conservatives have pledged to maintain spending on health and education, and spend more on defence, pensions, and the police.

Labour spending plans after 2007/8 are not known, but the rate of growth of public spending is expected to slow.

Conservatives have job centres in their sights for savings

All political parties hope to finance further spending and lower taxes by cutting back on unnecesary waste.

Labour has said it will make �22bn worth of savings by efficiences in government purchasing and cutting 80,000 jobs.

The Conservatives say they could save an additional �13bn by abolishing 200 quangos and cutting 235,000 jobs.

The Liberal Democrats will make different, smaller cuts such as scrapping the eurofighter.

Experts say realising such savings may not be easy.

Pensioner protests have stirred the parties to action

The Liberal Democrats want to replace council tax with a local income tax.

That would help most pensioners but raise taxes for many two-income couples, and rates would vary among councils.

Labour and the Conservatives both plan council tax relief for pensioners.

Labour would make a one-off payment of �200 this year, while the Tories plan to halve council tax every year for all pensioners, up to a �500 maximum.

Next year property revaluation could raise rates for many households in England.